The State Health Benefits
Program (SHBP) was originally established in 1961. It offers medical, prescription
drug, and dental coverage to qualified public employees and retirees, and their
eligible dependents. The State Health Benefits Program Act is found in the New
Jersey Statutes Annotated, Title 52, Article 17.25 et.seq. Rules governing the
operation and administration of the program are found in Title 17, Chapter 9
of the New Jersey Administrative Code.

The State Health Benefits
Commission (SHBC) is the executive organization responsible for overseeing the
State Health Benefits Program. The SHBC includes the State Treasurer as the
chairperson, the Commissioner of the Department of Banking and Insurance, the
Commissioner of the Department of Personnel, a State employee representative
chosen by the Public Employees’ Committee of the AFL-CIO, and a representative
chosen by the New Jersey Education Association (NJEA), or their designated representatives.
The Director of the Division of Pensions and Benefits is the Secretary to the
SHBC. The Division of Pensions and Benefits, specifically the Health Benefits
Bureau and the Bureau of Policy and Planning, is responsible for the daily administrative
activities of the SHBP.

The Traditional Plan is
an indemnity plan that provides reimbursement of expenses for treatment of illness
and injury. The Traditional Plan is self-funded. Funds for the payment of claims
and services come from funds supplied by the State, participating local employers,
and members.

The Traditional Plan is
administered for the SHBP by Horizon Blue Cross Blue Shield of New Jersey (Horizon
BCBSNJ). This plan allows you to use any eligible licensed provider, as defined
by the plan, for covered medical services. The plan pays only for the diagnosis
and treatment of illness or injury. It does not pay for preventive treatment
such as immunizations, physical exams, screening tests, and well-care visits
to doctors.

An online version of this
handbook containing current updates is available for viewing over the Internet
at: www.state.nj.us/treasury/pensions/shbp.htm
Be sure to check the Division of Pensions and Benefits Internet home page at:
www.state.nj.us/treasury/pensions for SHBP related forms, fact sheets, and news of any new developments affecting
the benefits provided under the SHBP.

Every effort has been made
to ensure the accuracy of the Traditional Plan Member Handbook, which
describes the benefits provided in the contract with Horizon BCBSNJ. However,
State law and the New Jersey Administrative Code govern the SHBP. If there
are discrepancies between the information presented in this handbook, and the
law, regulations, or contract, the latter will govern.

If, after reading this
booklet, you have any questions, comments, or suggestions regarding this material,
please write to the Division of Pensions and Benefits, PO Box 295, Trenton,
NJ 08625-0295, call us at (609) 292-7524, or send e-mail to: pensions.nj@treas.state.nj.us

You may also refer to the
following link for information on contacting the SHBP and
its related health services.

SPECIAL
PLAN PROVISIONS UNDER THE SHBP

WOMEN'S
HEALTH AND CANCER RIGHTS ACT

Effective October 21, 1998,
the State Health Benefits Commission adopted as policy, the federal mandate
"Women's Health and Cancer Rights Act of 1998." The mandate requires
that plans which cover mastectomies, must provide coverage for breast reconstruction
surgery to produce a symmetrical appearance, prostheses, and treatment of any
physical complications.

AUTOMOBILE-RELATED
INJURIES

The SHBP will provide secondary
coverage to Personal Injury Protection (PIP) unless you choose your SHBP plan
as your primary insurer on your automobile policy. In addition, if your automobile
policy contains provisions that make PIP secondary or as excess coverage to
your health plan, then the SHBP will automatically be primary to your PIP policy.
If you elect your SHBP plan as primary, this election may affect each of your
family members differently.

When the SHBP is primary
to your PIP policy, benefits are paid in accordance with the terms, conditions,
and limits set forth by the SHBP health plan you have chosen. Your PIP policy
would be a secondary payer to whom you would submit any bills unpaid by your
SHBP plan. Any portions of unpaid bills would be eligible for payment under
the terms and conditions of your PIP policy.

If your SHBP plan is secondary
to the PIP policy, when applicable, the actual benefits payable will be the
lesser of:

The remaining uncovered
allowable expenses after the PIP policy has provided coverage. The expenses
will be subject to medical appropriateness and any other provisions of your
SHBP plan, after application of any deductibles and coinsurance; or

The actual benefits that
would have been payable had your SHBP plan been primary to your PIP policy.

If you are enrolled in
several health plans regardless of whether you have selected PIP as your primary
or secondary coverage, the plans will coordinate benefits as dictated by each
plan's coordination of benefits terms and conditions. You should consult the
coordination of benefits provisions in your plan’s handbook and your PIP policy
to assist you in making this decision.

Please note: There
is no coordination of benefits for prescription drug expenses.

WORK-RELATED INJURY
OR DISEASE

Work-related injuries
or disease are not covered under the SHBP. This includes
the following:

Injuries arising out
of or in the course of work for wage or profit, whether or not your injuries
are covered by a Workers' Compensation policy.

Disease caused by reason
of its relation to Workers' Compensation law, occupational disease laws, or
similar laws.

Work-related tests, examinations,
or immunizations of any kind required by your work.

Please note: If you
collect benefits for the same injury or disease from both Workers' Compensation
and the State Health Benefits Program, you may be subject to prosecution for
insurance fraud.

HEALTH INSURANCE
PORTABILITY AND ACCOUNTABILITY ACT

The federal Health Insurance
Portability and Accountability Act (HIPAA) of 1996 requires group health plans
to implement several provisions contained within the law or notify its membership
each plan year of any provisions from which they may file an exemption. Self-funded,
non-federal governmental plans may elect certain exemptions from compliance
with HIPAA provisions on a year-to-year basis.

Mental Health Parity Act Requirements

The State Health Benefits
Commission has filed an exemption from the mental health parity requirement
with the federal Centers for Medicare and Medicaid Services for calendar year
2006. As a result, maximum annual and lifetime dollar limits apply to mental
health benefits under the Traditional Plan, except for biologically-based
mental illness. Maximum annual and lifetime dollar limits for mental health
benefits are outlined for the Traditional Plan in this handbook and are also
described in the SHBP Comparison
Summary Chart.

All SHBP health plans meet
or exceed the federal requirements with the exception of mental health parity
for the Traditional Plan and NJ PLUS. Parity would require that the dollar limitations
on mental health benefits are not lower than those of medical or surgical benefits.

Certification of Coverage

HIPAA rules state that
if a person was previously covered under another group health plan, that coverage
period will be credited toward any pre-existing condition limitation period
for the new plan. This includes any prior group plan coverage that was in effect
90 days prior to the individual's effective date under the new plan. A Certification
of Coverage form, which verifies your SHBP group health plan enrollment
and termination dates, is available through your payroll or human resources
office, should you terminate your coverage.

HIPAA Privacy

The State Health Benefits
Program makes every effort to safeguard the health information of its members
and complies with the privacy provisions of HIPAA, which requires that health
plans maintain the privacy of any personal information relating to its members’
physical or mental health. See page 80 for the State Health Benefits Program’s
Notice of Privacy Practices.

PURCHASE OF INDIVIDUAL
INSURANCE COVERAGE

Employees, retirees, and
their dependents may purchase individual, direct payment coverage from their
State Health Benefits Program (SHBP) health plan carrier if their loss of group
health coverage is due to any reason other than voluntary termination. Note:
failure to pay required premiums is considered voluntary termination.

Before considering a policy,
New Jersey residents who are not Medicare eligible, should first investigate
coverage available under the provisions of the New Jersey Individual Health
Coverage Program. Information about available policies can be obtained from
the New Jersey Individual Health Coverage Board at the Department of Banking
and Insurance. Carrier and rate information can be obtained by calling 1-800-838-0935
or at www.njdobi.org

You will have 31 days from
the end of your SHBP coverage to exercise your right to a direct payment policy.

MEDICAL PLAN EXTENSION
OF BENEFITS

If you or a dependent are
totally disabled with a condition or illness at the time of your termination
from the SHBP and you have no other group medical coverage, you may qualify
for an extension of benefits for this specific condition or illness. If you
feel that you may qualify for an extension of benefits please contact Horizon
BCBSNJ for assistance.

If the extension applies,
it is only for expenses relating to the disabling condition or illness. An extension
under any SHBP plan will be for the time you remain totally disabled from any
such condition or illness, but not beyond the end of the calendar year after
the one in which your coverage ends. During an extension there will be no automatic
restoration of part or all of a lifetime benefit maximum.

AUDIT
OF DEPENDENT COVERAGE

Periodically, the SHBP
performs an audit using a random sample of members to determine if dependents
are eligible under plan provisions. Proof of dependency such as a marriage certificate
or birth certificate is required. Coverage for ineligible dependents will be
terminated. Failure to respond to the audit will result in the termination of
coverage for dependents.

STATE
HEALTH BENEFITS PROGRAM ELIGIBILITY

ACTIVE EMPLOYEE
ELIGIBILITY

Eligibility for coverage
is determined by the State Health Benefits Program (SHBP). Enrollments, terminations,
changes to coverage, etc. must be presented through your employer to the SHBP.
If you have any questions concerning eligibility provisions, you should call
the Division of Pensions and Benefits' Office of Client Services at (609) 292-7524.

STATE EMPLOYEES

To be eligible for Traditional
Plan State employee coverage, you must work full-time or be an appointed or
an elected officer of the State of New Jersey (this includes employees of a
State agency or authority and employees of a State college or university). For
State employees, full-time normally requires 35 hours per week.

The following categories
of employees are not eligible for coverage under the Traditional Plan.

State Part-Time Employees
— Part-time employees of the State and part-time faculty at institutions of
higher education that participate in the SHBP are eligible for coverage under
NJ PLUS and the Employee Prescription Drug Plan if they are members of a State-administered
pension system. The employee or faculty member must pay the full cost of the
coverage. Part-time employees will not qualify for employer or State-paid post-retirement
health care benefits, but may enroll in the SHBP retired group at their own
expense provided they were covered by the SHBP up to the date of retirement.
See Fact Sheet #66, SHBP Coverage
for State Part-Time Employees, for more information.

State Intermittent
Employees — Certain intermittent State employees who have worked 750
hours in a Fiscal Year (July 1 - June 30) will be eligible for NJ PLUS and/or
the Employee Prescription Drug Plan. Intermittent employees who maintain 750
hours of work per year continue to qualify for health benefits in subsequent
years. See Fact Sheet #69, SHBP
Coverage for State Intermittent Employees, for more information.

New Jersey National
Guard — A member of the New Jersey National Guard who is called to State
active duty for 30 days or more is eligible to enroll in NJ PLUS and the Employee
Prescription Drug Plan at the State's expense. Upon enrollment, the member may
also enroll eligible dependents. The Department
of Military and Veteran's Affairs is responsible for notifying eligible
members and for notifying the Division of Pensions and Benefits of members who
are eligible.

State Employees Enrolled
On or After July 1, 2003 — Certain State employees who enroll in the
SHBP on or after July 1, 2003 are not eligible for coverage under the Traditional
Plan. This group includes State employees as determined by union contract and
all non-aligned­­ State employees as provided under Chapter 119, P.L. 2003.
See your human resources representative for information about your union affiliation.

LOCAL EMPLOYEES

To be eligible for Traditional
Plan local employer coverage, you must be a full-time employee or an appointed
or elected officer receiving a salary from a local employer (county, municipality,
county or municipal authority, board of education, etc.) that participates in
the SHBP. Each participating local employer defines the minimum hours required
for full-time by a resolution filed with the SHBP, but it can be no less than
an average of 20 hours per week. Employment must also be for 12 months per year
except for employees whose usual work schedule is 10 months per year (the standard
school year).

The following categories
of employees are not eligible for coverage under the Traditional Plan.

Local Part-Time Employees
— A part-time faculty member employed by a county or community college that
participates in the SHBP is eligible for coverage under NJ PLUS — and if provided
by the employer the Employee Prescription Drug Plan — if they are members of
a State-administered pension system. The faculty member must pay the full cost
of the coverage. Part-time faculty members will not qualify for employer or
State-paid post-retirement health care benefits, but may enroll in the SHBP
retired group at their own expense provided they were covered by the SHBP up
to the date of retirement. See Fact Sheet
#66, SHBP Coverage for State Part-Time Employees, for more information.

Spouse —
This is a member of the opposite sex to whom you are legally married. A photocopy
of the marriage certificate is required for enrollment.

Domestic Partner
— This is a same-sex domestic partner, as defined under Chapter 246,
P.L. 2003, the Domestic Partnership Act, of any State employee, State retiree,
or an eligible employee or retiree of a SHBP participating local public entity
if the local governing body adopts a resolution to provide Chapter 246 health
benefits. A photocopy of the New Jersey Certificate of Domestic Partnership
(or a valid certification from another jurisdiction that recognizes same-sex
domestic partners, civil unions, or similar same-sex relationships) is required
for enrollment. The cost of same-sex domestic partner coverage may be subject
to federal tax (see your employer or Fact
Sheet #71, Benefits Under the Domestic Partnership Act, for details).

Children
— This includes your unmarried children under age 23 who live with you in a
regular parent-child relationship, your children who are away at school, as
well as divorced children living at home provided that they are dependent upon
you for support and maintenance. If you are a single parent, divorced, or legally
separated, your children who do not live with you are eligible if you are legally
required to support those children — Affidavits
of Dependencyand legal documentation are required with enrollment
forms for these cases. If a Qualified Medical Child Support Order (QMCSO) is
issued for your child, the health plan of the parent named in the QMCSO will
be the primary plan for that child. The employer must be notified of the QMCSO
and a NJ State Health
Benefits Program Application submitted electing coverage for the child
within 60 days of the date the order was issued.

Stepchildren, foster children,
legally adopted children, and children in a guardian-ward relationship are also
eligible provided they live with you and are substantially dependent upon you
for support and maintenance. Affidavits
of Dependency and legal documentation are required with enrollment forms
for these cases.

Coverage for an enrolled
child will end when the child marries, enters into a domestic partnership, moves
out of the household, turns age 23, or is no longer dependent on you for support
and maintenance. Coverage for children age 23 ends on December 31 of the year
in which they turn age 23 (see the COBRA section for continuation
of coverage provisions).

Dependent Children
with Disabilities — If a covered child is not capable of self-support
when he or she reaches age 23 due to mental illness, mental retardation, or
a physical disability, he or she may be eligible for a continuance of coverage.
To request continued coverage, contact the Office of Client Services at (609)
292-7524 or write to the Division of Pensions and Benefits, Health Benefits
Bureau, 50 West State Street, P. O. Box 299, Trenton, New Jersey 08625 for a
Continuance for Dependent with Disabilities form. The form and proof
of the child's condition must be given to the Division no later than 31 days
after the date coverage would normally end. Since coverage for children ends
on December 31 of the year they turn 23, you have until January 31 to file the
Continuance for Dependent with Disabilities form. Coverage for children
with disabilities may continue only while (1) you are covered through the SHBP,
and (2) the child continues to be disabled, and (3) the child is unmarried,
and (4) the child remains dependent on you for support and maintenance. You
will be contacted periodically to verify that the child remains eligible for
continued coverage.

MEDICARE
COVERAGE WHILE EMPLOYED

In general, it is not necessary
for a Medicare-eligible employee, spouse, eligible same-sex domestic partner,
or dependent child(ren) to be covered by Medicare while the employee remains
actively at work. It is required that they enroll in both Parts A and B prior
to retirement so that coverage will be effective at the time of retirement.
However, if you or your dependents become eligible for Medicare due to End
Stage Renal Disease (ESRD) you and/or your dependents must enroll
in Medicare Parts A and B even though you are actively at work. For more information,
see Medicare Coverage in the Retiree Eligibility section.

RETIREE ELIGIBILITY

The following individuals
will be offered SHBP Retired Group coverage for themselves and their eligible
dependents:

Full-time State employees,
employees of State colleges/universities, autonomous State agencies and commissions,
or local employees who were covered by, or eligible for, the SHBP at the time
of retirement.

Part-time State employees
and part-time faculty at institutions of higher education that participate
in the SHBP if enrolled in the SHBP at the time of retirement.

Full-time members of
the Teachers' Pension and Annuity Fund (TPAF) and school board or county college
employees enrolled in the Public Employees' Retirement System (PERS) who retire
with 25 years or more of service credit in one or more State or locally-administered
retirement system or who retire on a disability retirement, even if their
employer did not cover its employees under the SHBP. This includes those who
elect to defer retirement with 25 or more years of service credit in one or
more State or locally-administered retirement system (see Aggregate
of Service Credit).

Full-time members of
the TPAF and school board or county college employees enrolled in the PERS
who retire with less than 25 years of service credit from an employer
that participates in the SHBP.

Full-time members of
the TPAF and PERS who retirefrom a board of education, vocational/ technical
school, or special services commission; maintain participation in the health
benefits plan of their former employer; and are eligible for and enrolled
in Medicare Parts A and B.

Participants in the Alternate
Benefit Program (ABP) who retire with at least 25 years of credited ABP service
or those who are on a long-term disability.

Certain local policemen
or firemen with 25 years or more of service credit in the pension fund or
retiring on a disability retirement if the employer does not provide any payment
or compensation toward the cost of the retiree's health benefits. A qualified
retiree may enroll at the time of retirement or when he or she becomes eligible
for Medicare. See Fact Sheet #47,
SHBP Retired Coverage Under Chapter 330, for more information.

Surviving spouses, eligible
same-sex domestic partners, and children of Police and Firemen’s Retirement
System (PFRS) members or State Police Retirement System (SPRS) members killed
in the line of duty.

Eligibility for
membership in the SHBP for the individuals listed in this section is contingent
upon meeting two conditions:

You must be immediately
eligible for a retirement allowance from a State- or locally-administered
retirement system (except certain employees retiring from a school board or
community college — or certain disability retirees);
and

You were a full-time
employee and eligible for employer-paid medical coverage immediately preceding
the effective date of your retirement (if you are an employee retiring from
a school board or community college under a deferred retirement with 25 or
more years of service, you must have been eligible at the time you terminated
your employment), or a part-time State employee or part-time faculty member
who is enrolled in the SHBP immediately preceding the effective date
of your retirement.

This means that if you
allow your active coverage to lapse (i.e. because of a leave of absence, reduction
in hours, or termination of employment) prior to your retirement or you defer
your retirement for any length of time after leaving employment, you will lose
your eligibility for health coverage under the Retired Group of the SHBP. (This
does not include full-time TPAF retirees and PERS board of education or county
college retirees with 25 or more years of service).

Employees whose coverage
is terminated prior to retirement but who are later approved for a disability
retirement will be eligible for coverage under the Retired Group of
the SHBP beginning on the employee’s retirement date. If the approval of the
disability retirement is delayed, coverage shall not be retroactive for more
than one year.

Aggregate of Service Credit

Upon retirement, a full-time
State employee, board of education, or county college employee who has 25 years
or more of service credit, is eligible for State-paid health benefits under
the SHBP. A full-time employee of a local government who has 25 years or more
of service credit whose employer is enrolled in the SHBP and has chosen
to provide post-retirement medical coverage to its retirees is eligible for
employer-paid health benefits under the SHBP. Effective August 15, 2001, instead
of having to meet the 25-year service credit requirement from a singleState
or locally-administered retirement system, a retiree under the SHBP may receive
this benefit if the 25 years of service credit is from one or more
State or locally-administered retirement systems and the time credited
is nonconcurrent.

Eligible Dependents of Retirees

Dependent eligibility rules
for Retired Group coverage are the same as for Active Group coverage except
for the Medicare requirements.

Enrolling in the Retired Group
of the SHBP

The SHBP is notified when
you file an application for retirement with the Division of Pensions and Benefits.
If eligible, you will receive a letter inviting you to enroll in the SHBP’s
Retired Group coverage. Early filing for retirement is recommended to prevent
any lapse of SHBP coverage or delay of eligibility.

Additional restrictions
and/or requirements may apply when enrolling in the Retired Group of the SHBP.
Be sure to carefully read the Retiree Enrollment section of the SHBP
Summary Program Description
(PDF file - size 356k
- Requires Acrobat Reader).

MEDICARE COVERAGE

IMPORTANT: A Retired
Group member and/or dependent(s) who are eligible for Medicare coverage by reason
of age or disability must be enrolled in both Medicare Part A (Hospital Insurance)
and Part B (Medical Insurance) to enroll or remain in SHBP Retired Group coverage.

You will be required to
submit documentation of enrollment in Medicare Parts A and B when you become
eligible for that coverage. Acceptable documentation includes a photocopy of
your Medicare card showing both your Part A and B enrollment or a letter from
Medicare indicating the effective dates of both your Parts A and B coverage.
Send your evidence of enrollment to the Health Benefits Bureau, Division of
Pensions and Benefits, PO Box 299, Trenton, New Jersey 08625-0299 or fax it
to (609) 341-3407. If you do not submit evidence of Medicare coverage under
both Parts A and B, you and/or your dependents will be terminated from the SHBP.
Upon submission of proof of full Medicare coverage, your coverage will be reinstated
by the SHBP.

IMPORTANT: If a provider
is not registered with or opts out of Medicare, no benefits are payable under
the SHBP for the provider’s services.

A Member May be Eligible
for Medicare for the Following Reasons:

Medicare Eligibility
by Reason of Age

This applies to a member
who is the retiree or covered spouse/same-sex domestic partner and is at
least 65 years of age.

A member is considered
to be eligible for Medicare by reason of age from the first day of the month
during which he or she reaches age 65. However, if he or she is born on
the first day of a month, he or she is considered to be eligible for Medicare
from the first day of the month which is immediately prior to his/her 65th
birthday.

The retired group
health plan is the secondary plan.

Medicare Eligibility
by Reason of Disability

This applies to a member
or dependent who is under age 65.

A member is considered
to be eligible for Medicare by reason of disability if they have been receiving
Social Security Disability benefits for 24 months.

The retired group health
plan is the secondary plan to Medicare when the member is the subscriber, is
under age 65, and is retired, or when the dependent is covered under Medicare
and not covered under any active employer group plan.

Medicare Eligibility
by Reasons of End Stage Renal Disease

A member usually becomes
eligible for Medicare at age 65 or upon receiving Social Security Disability
benefits for two years. A member who is not eligible for Medicare because
of age or disability may qualify because of treatment for End Stage Renal
Disease (ESRD). When a person is eligible for Medicare due to ESRD, Medicare
is the secondary payer when:

The individual has
group health coverage of their own or through a family member (including
a spouse or domestic partner).

The group health
coverage is from either a current employer or a former employer. The employer
may be of any size (not limited to employers with more than 20 employees).

The rules listed above,
known as the Medicare Secondary Payer (MSP) rules are federal regulations
that determine whether Medicare pays first or second to the group health
plan. These rules have changed over time.

As of January 1, 2000,
where the member becomes eligible for Medicare solely on the basis of ESRD,
the Medicare eligibility can be segmented into three parts: (1) an initial
three-month waiting period; (2) a "coordination of benefits" period;
and (3) a period where Medicare is primary.

Three-month waiting period

Once a person has begun
a regular course of renal dialysis for treatment of ESRD, there is a three-month
waiting period before the individual becomes entitled to Medicare Parts A and
B benefits. During the initial three-month period, the group health plan
is primary.

Coordination of benefits period

During the "coordination
of benefits" period, Medicare is secondary to the group health plan
coverage. Claims are processed first under the health plan. Medicare considers
the claims as a secondary carrier. For members who became eligible for Medicare
due solely to ESRD after 1996, the coordination of benefits period is 30 months.

When Medicare is primary

After the coordination
of benefits period ends, Medicare is considered the primary payer and the
group health plan is secondary.

Dual Medicare Eligibility

When the member is eligible
for Medicare because of age or disability and then becomes eligible for Medicare
because of ESRD:

If the health plan is
primary because the member has active employment status, then the group
health plan continues to be primary to 30 months from the date of dual
Medicare entitlement.

If the health plan is
secondary because the member is not actively employed, then the health
plan continues to be the secondary payer. There is no 30-month coordination
period.

How to File a Claim If You Are
Eligible for Medicare

When filing your claim,
follow the procedure listed below that applies to you.

New Jersey Physicians or Providers:

You should provide the
physician or provider with your identification number. This number is indicated
on the Medicare Request for Payment (claim form) under "Other
Health Insurance."

The physician or provider
will then submit the Medicare Request for Payment to the Medicare Part
B carrier.

After Medicare has taken
action, you will receive an Explanation of Benefits statement from
Medicare.

If the remarks section
of the Explanation of Benefits contains the following statement, you
need not take any action: "This information has been forwarded to the
SHBP Traditional Plan for their consideration in processing supplementary
coverage benefits."

If the statement shown
above does not appear on the Explanation of Benefits, you should indicate
your Social Security number and the name and address of the physician or provider
in the remarks section of the Explanation of Benefits with a completed
claim form and send it to the address on the claim form of your SHBP plan.

Out-Of-State Physicians or
Providers:

The Medicare Request
for Payment form should be submitted to the Medicare Part B carrier in
the area where services were performed. Call your local Social Security office
for information.

When you receive the
Explanation of Benefits, indicate your identification number and the
name and address of the physician or provider in the remarks section and send
the Explanation of Benefits with a completed claim form to the address
on the claim form.

Retirees With Medicare Who Move
Outside the United States

Medicare does not cover
services outside the United States. For SHBP members who reside outside the
United States, the Traditional Plan covers services as if the plan were primary.

Members who reside outside
the United States must still maintain their Medicare coverage (Parts A and B)
in order to be covered under the SHBP.

Members who reside outside
the United States, even if they reside in a country with socialized medicine,
should consider that if they travel outside their country of residence they
will still need coverage. In order to have SHBP coverage at any time in the
future, the member must stay enrolled in the SHBP, since once a member terminates
coverage they will not normally be reinstated.

COBRA
COVERAGE

CONTINUING COVERAGE
WHEN IT WOULD NORMALLY END

The Consolidated Omnibus
Budget Reconciliation Act of 1985 (COBRA) is a federally regulated law that
gives employees and their eligible dependents the opportunity to remain in their
employer's group coverage when they would otherwise lose coverage. COBRA coverage
is available for limited time periods (see Duration of COBRA
Coverage), and the member must pay the full cost of the coverage plus
an administrative fee.

Under COBRA, you may elect
to enroll in any or all of the coverages you had as an active employee or dependent
(health, prescription drug, dental, and vision). You may also change your health
or dental plan when enrolling in COBRA. You may elect to cover the same dependents
that you covered while an active employee, or delete dependents from coverage
— however, you cannot add dependents who were not covered while an employee
except during the annual Open Enrollment period (see below) or unless a "qualifying
event" (marriage, birth or adoption of a child, etc.) occurs within 60
days of the COBRA event.

COBRA enrollees have the
same rights to coverage at Open Enrollment as are available to active employees.
This means that you or a dependent who elected to enroll under COBRA are able
to enroll in any SHBP health plan and, if offered by your employer, SHBP prescription
drug coverage during the SHBP Open Enrollment period regardless of whether you
elected to enroll for the coverage when you went into COBRA. However, any time
of non-participation in the benefit is counted toward your maximum COBRA coverage
period. If the State Health Benefits Commission makes changes to the health
insurance package available to active employees and retirees, those changes
apply equally to COBRA participants.

COBRA Events

Continuation of group coverage
under COBRA is available if you or any of your covered dependents would otherwise
lose coverage as a result of any of the following events:

Loss of a dependent child's
eligibility through independence (moving out of household), the attainment
of age 23, marriage, or dependent partnership.

The employee elects Medicare
as primary coverage. (Federal law requires active employees to terminate their
employer's health coverage if they want Medicare as their primary coverage.)

The occurrence of the COBRA
event must be the reason for the loss of coverage for you or your dependent
to be able to take advantage of the provisions of the law. If there is no coverage
in effect at the time of the event, there can be no continuation of coverage
under COBRA.

Cost of COBRA Coverage

If you choose to purchase
COBRA benefits, you pay 100 percent of the cost of the coverage plus a two percent
charge for administrative costs.

Duration of COBRA Coverage

COBRA coverage may be purchased
for up to 18 months if you or your dependents become eligible because of termination
of employment, a reduction in hours, or a leave of absence.

Coverage may be extended
up to 11 additional months, for a total of 29 months, if you have a Social Security
Administration approved disability (under Title II or XVI of the Social Security
Act) for a condition that existed when you enrolled in COBRA or began within
the first 60 days of COBRA coverage. Proof of Social Security Administration
determination must be submitted within 60 days of the award or within 60 days
of COBRA enrollment. Coverage will cease either at the end of your COBRA eligibility
or when you obtain Medicare coverage, whichever comes first.

COBRA coverage may be purchased
by a dependent for up to 36 months if he or she becomes eligible because of
your death, divorce, dissolution of a same-sex domestic partnership,
or he or she becomes ineligible for continued group coverage because of marriage,
entering into a domestic partnership, attaining age 23, or moving out of the
household, or because you elected Medicare as your primary coverage.

If a second qualifying
event — such as a divorce — occurs during the 18-month period following the
date of any employee's termination or reduction in hours, the beneficiary of
that second qualifying event will be entitled to a total of 36 months of continued
coverage. The period will be measured from the date of the loss of coverage
caused by the first qualifying event.

Leave taken under the federal
and/or State Family Leave Act is not subtracted from your COBRA eligibility
period.

Employer Responsibilities Under
COBRA

The COBRA law requires
employers to:

Notify you and your dependents
of the COBRA provisions within 90 days of when you and your dependents are
first enrolled;

Notify you, your spouse
or eligible same-sex domestic partner, and your children of the right to purchase
continued coverage within 14 days of receiving notice that there has been
a COBRA qualifying event that causes a loss of coverage;

Send the COBRA Notification
Letter and a COBRA Application within 14 days of receiving notice
that a COBRA qualifying event has occurred;

Notify the SHBP within
30 days of the loss of an employee’s coverage; and

Maintain records documenting
their compliance with the COBRA law.

Employee Responsibilities Under
COBRA

The law requires that you
and/or your dependents:

Notify your employer
(if you are retired, you must notify the Health Benefits Bureau of the Division
of Pensions and Benefits) that a divorce, legal separation, dissolution of
a same-sex domestic partnership, or your death has occurred or that your child
has married, entered into a domestic partnership, moved out of your household,
or reached age 23 — notification must be given within 60 days of the date
the event occurred;

File a COBRA Application
within 60 days of the loss of coverage or the date of the COBRA Notice provided
by your employer, whichever is later;

Pay the required monthly
premiums in a timely manner; and

Pay premiums, when billed,
retroactive to the date of group coverage termination.

Failure to Elect COBRA Coverage

In considering whether
to elect continuation of coverage under COBRA, an eligible employee, retiree,
or dependent (also known as a “qualified beneficiary” under COBRA law) should
take into account that a failure to continue group health coverage will affect
future rights under federal law.

First, you can lose the
right to avoid having pre-existing condition exclusions applied to you by
other group health plans if you have more than a 63-day gap in health coverage.
The election of continuation of coverage under COBRA may help you to bridge
such a gap. (If, after enrolling in COBRA you obtain new coverage which has
a pre-existing condition clause, you may continue your COBRA enrollment to
cover the condition excluded by the pre-existing condition clause.)

Second, you will lose
the guaranteed right to purchase individual health insurance policies that
do not impose pre-existing condition exclusions if you do not continue coverage
under COBRA for the maximum time available to you.

Finally, you should take
into account that you have special enrollment rights under federal law. You
have the right to request special enrollment in another group health plan
for which you are otherwise eligible (such as a plan sponsored by your spouse’s
employer) within 30 days of the date your group coverage ends. You will also
have the same special enrollment right at the end of the COBRA coverage period
if you get the continuation of coverage under COBRA for the maximum time available
to you.

Termination of COBRA Coverage

Your COBRA coverage through
the SHBP will end when any of the following situations occur:

Your eligibility period
expires;

You fail to pay your
premiums in a timely manner;

After the COBRA event,
you become covered under another group insurance program (unless a pre-existing
clause applies);

You voluntarily cancel
your coverage;

Your employer drops out
of the SHBP; or

You become eligible for
Medicare after you elect COBRA coverage. (This affects health insurance only,
not dental, prescription, or vision coverage.)

TRADITIONAL
PLAN BENEFITS

USING THIS HANDBOOK

How to Determine Available Benefits

The Traditional Plan provides
benefits in three distinct categories: Basic Benefits, Extended Basic Benefits,
and Major Medical Benefits. The medical services you receive may fall
into any or all of these three categories. Therefore, you should review all
three categories of benefit descriptions in this handbook to determine which
benefits are covered for a specific service. For example, when using the hospital
emergency room, covered expenses would be found under the Basic
Benefits, Extended Basic Benefits, and Major
Medical Benefits sections of this handbook.

All benefits listed in
this handbook may be subject to limitations and exclusions as described in subsequent
sections.

Even though a service
or supply may not be described or listed in this handbook, that does not make
the service or supply eligible for a benefit under this plan.

GENERAL CONDITIONS
OF THE PLAN

The plan will pay only
for eligible services or supplies, which:

Are medically needed
at the appropriate level of care (see below) for the medical condition (When
there is a question as to medical need, the decision on whether the treatment
is eligible for coverage will be made by Horizon
BCBSNJ.);

The medical need and appropriate
level of care for any service or supply as recommended by the treating physician
is determined by Horizon BCBSNJ and must meet each of these requirements:

It is ordered by a doctor
for the diagnosis or the treatment of an illness or injury.

The prevailing opinion
within the appropriate specialty of the United States medical profession is
that it is safe and effective for its intended use, and that its omission
would adversely affect the person's medical condition.

That it is the most appropriate
level of service or supply considering the potential benefits and harms to
the patient.

It is known to be effective
in improving health outcomes (for new interventions, effectiveness is determined
by scientific evidence; then, if necessary, by professional standards; then,
if necessary, by expert opinion).

It is furnished by an
eligible provider with appropriate training, experience, staff, and facilities
to furnish this particular service or supply.

When there is a question
as to medical need, the decision on whether the treatment is eligible for coverage
will be made by Horizon BCBSNJ.

Reasonable and
Customary Allowances

The plan covers only reasonable
and customary allowances, which are determined by the Prevailing Healthcare
Charges System (PHCS) fee schedule. This schedule is based on actual charges
by physicians in a specific geographic area for a specific service. If your
physician charges more than the reasonable and customary allowance, you will
be responsible for the full amount above the reasonable and customary allowance
in addition to any deductible and coinsurance you may be required to pay.

Experimental or Investigational
Treatments

The plan does not
cover treatment that is considered experimental or investigational. Charges
in connection with such a service or supply are also not covered. For the purpose
of this exclusion, a service or supply will be considered experimental or investigational
if the claims administrator determines that one or more of the following is
true.

The service or supply
is under study or in a clinical trial to evaluate its toxicity, safety, or
efficacy for a particular diagnosis or set of indications. Clinical trials
include but are not limited to phase I, II, and III clinical trials, with
the exception of approved cancer trials.

The prevailing opinion
within the appropriate specialty of the United States medical profession is
that the service or supply needs further evaluation for a particular diagnosis
or set of indications before it is used outside clinical trials or other research
settings. The claims administrator will determine this based on:

Published reports
in authoritative medical literature; and

Regulations, reports,
publications, and evaluations issued by government agencies such as the
Agency for Health Care Policy and Research, the National Institutes of
Health, and the federal Food and Drug Administration (FDA).

It is a drug, device,
or other supply that is subject to FDA approval but:

Does not have FDA
approval for sale and use in the United States (that is, for introduction
into and distribution in interstate commerce); or

Has FDA approval
only under the Treatment Investigational New Drug regulation or a similar
regulation; or

Has FDA approval,
but is being used for an indication or at a dosage that is not an acceptable
off-label use. Horizon BCBSNJ will determine if a certain use is
an accepted off-label use based on published reports in peer-reviewed,
authoritative medical literature and entries in the following drug compendia:
The American Medical Association Drug Evaluations, the American Hospital
Formulary Service Drug Information, and the United States Pharmacopoeia
Dispensing Information; or

Is an FDA-regulated
product, service, supply, or drug under any FDA program other than FDA
approval for introduction and distribution into interstate commerce.

The provider's institutional
review board acknowledges that the use of the service or supply is experimental
or investigational and subject to that board's approval.

The provider's institutional
review board requires that the patient, parent, or guardian give an informed
consent stating that the service or supply is experimental or investigational,
part of a research project or study, or federal law requires such a consent.

Research protocols indicate
that the service or supply is experimental or investigational. This item applies
for protocols used by the patient's provider as well as for protocols used
by other providers studying substantially the same service or supply.

The service or supply
is not recognized by the prevailing opinion within the appropriate medical
specialty as an effective treatment for the particular diagnosis or set of
indications.

Educational or Developmental
Services or Supplies, or Educational Testing

The Traditional Plan does
not cover services or supplies that are rendered with the primary purpose
being to provide the person with any of the following:

Training in the activities
of daily living. This does not include services directly related to treatment
of an illness or injury that resulted in a loss of a previously demonstrated
ability to perform those activities.

Instruction in scholastic
skills such as reading and writing.

Preparation for an occupation.

Treatment for learning
disabilities.

Services rendered at
Alternative Educational Facilities.

To promote development
beyond any level of function previously demonstrated.

In the case of a hospital
stay, the stay, services, and supplies are not covered to the extent
that they are determined to be allocated to the scholastic education or vocational
training of the patient.

Predetermination of Benefits

A predetermination for
any service may be obtained in writing in advance of services being rendered.
The written request will need to include the provider's name, address, and phone
number, the diagnosis, a description of the services to be rendered, and the
anticipated charges. Telephone contact with Horizon BCBSNJ or the Division of
Pensions and Benefits about coverage does not constitute a predetermination
of benefits. If the actual services rendered differ from those described in
the written request, the predetermination of benefits will have no effect. A
predetermination is valid for one year from the date issued.

Custodial, Maintenance, and Supportive
Care

The Traditional Plan does
not provide coverage for services that are determined to be for custodial,
maintenance, and/or supportive care. Custodial care relates to services that
do not require the skill level of a nurse to perform. These services
include, but are not limited to, assisting with activities of daily living,
meal preparation, ambulation, cleaning, and laundry functions. Maintenance care
is care that when provided does not substantially improve the condition.
When care is provided for a condition that has reached maximum improvement and
further services will not appreciably improve the condition, care will be deemed
to be maintenance care and no longer eligible for reimbursement. Supportive
care is treatment for patients having reached maximum therapeutic benefit in
whom periodic trials of therapeutic withdrawals fail to sustain previous therapeutic
gains.

Regardless of whether they
are medically necessary, custodial, maintenance, and/or supportive care are
ineligible for reimbursement under the Traditional Plan.

Discounted Providers

Traditional Plan members
and their covered dependents are eligible to take advantage of increased savings
by using a special Blue Cross Blue Shield (BCBS) program. In this program, participating
providers contract with BCBS plans throughout the country. When you use a participating
provider, the Traditional Plan pays the provider. You pay the provider your
20 percent coinsurance based on a contracted fee and applicable deductible amounts,
thereby reducing your out-of-pocket cost. Participating providers submit all
claims directly to the BCBS plan, eliminating the necessity of claim forms.

To find out if your provider
participates in the program, or to identify participating providers, call 1-800-414-SHBP
(7427) or contact the local BCBS plan in the area where you reside.

PRESCRIPTION
DRUG BENEFITS

EMPLOYEE PRESCRIPTION
DRUG PLAN

The Employee Prescription
Drug Plan is offered to active State employees and their eligible dependents
as a separate prescription drug plan. Local employers may also elect to provide
the SHBP Employee Prescription Drug Plan to their employees as a separate prescription
drug benefit.

The Employee Prescription
Drug Plan is currently administered by Horizon Blue Cross Blue Shield of New
Jersey (Horizon BCBSNJ) through Caremark.

Plan Benefits

Employee Prescription Drug
Plan benefits are available through a participating retail pharmacy or
through the Caremark mail order and specialty pharmacy services.

Retail pharmacy
services require a copayment for each 30-day supply. Employee Prescription
Drug Plan participants may obtain up to a 90-day supply of prescription drugs
at participating retail pharmacies. You are required to pay two copayments
for a 31 to 60-day supply or three copayments for a 61 to 90-day supply.

Mail order participants
can receive up to a 90-day supply of prescription drugs for one mail order
copayment.

Specialty Pharmacy
Services, effective February 15, 2006, are provided through Caremark Specialty
Pharmacy which is the exclusive provider for specialty pharmaceuticals for
the SHBP’s prescription drug plans. Specialty pharmaceuticals are a class
of medications that are typically produced through biotechnology, administered
by injection, and/or require special patient monitoring and handling. If your
doctor has prescribed a specialty pharmaceutical, you will not be able to
fill the prescription at a retail pharmacy. If you try to fill a specialty
prescription at a retail pharmacy, the pharmacy representative will advise
you to contact CaremarkConnect at 1-800-237-2767. When calling, identify yourself
as a State Health Benefits Program member. Caremark will contact your doctor
and take care of the appropriate paperwork. Your medication will be shipped
directly to your home, office, or doctor’s office.

The State Health Benefits
Commission requires that all participating employees and retirees have access
to prescription drug coverage.

If you are employed
by a county, municipality, board of education, or other local public employer
that does not provide a separate prescription drug plan, your SHBP health
plan will include prescription drug benefits.

If you are eligible
for prescription drug coverage through a separate drug plan provided by your
employer, your SHBP medical plan will not include prescription
drug coverage and any prescription drug copayments from other group plans
will not be reimbursed through the Traditional Plan, NJ PLUS, or any SHBP
HMO.

Active employees whose
employer does not offer a separate prescription drug plan have prescription
drug coverage through the Employee Prescription Drug Reimbursement Plan for
the Traditional Plan. The Employee Prescription Drug Reimbursement Plan is accepted
at most pharmacies nationwide. These pharmacies have agreed to provide prescription
drugs at a discounted price to plan members. When you use a participating pharmacy,
most claims can be submitted electronically to the plan for consideration, and
you will be reimbursed the applicable percentage of the discounted price after
satisfying your deductible.

After your Traditional
Plan out-of-pocket maximum has been reached (see Coinsurance),
you will be reimbursed 100 percent of the eligible pharmacy price under the
Employee Prescription Drug Reimbursement Plan.

A mail order service is
also available through the Employee Prescription Drug Reimbursement Plan for
the Traditional Plan for active employees (including COBRA participants) who
do not have a separate prescription drug plan through their employer. The mail
order service is administered by Horizon Blue Cross Blue Shield of New Jersey
through the mail service pharmacy owned and operated by Caremark. Members may
order maintenance prescriptions by mail or online from caremark.com

Using a pharmacy that does
not participate in the plan may result in higher out-of-pocket costs. If
you have a prescription filled at a non-participating pharmacy or forget to
present your Employee Prescription Drug Reimbursement Plan identification card,
you will need to submit a completed claim for reimbursement.

Some prescription drugs
are covered by the Employee Prescription Drug Reimbursement Plan only in certain
quantities.

RETIREE PRESCRIPTION
DRUG COVERAGE

Retirees enrolled in the
Traditional Plan have access to a separate Retiree Prescription Drug Plan that
includes retail pharmacy, mail order, and specialty pharmacy services. The plan
is administered by Horizon Blue Cross Blue Shield of New Jersey through Caremark,
and features a three-tiered design.

Based on the design adopted
at the time the plan was implemented, effective January 1, 2006, copayment amounts
for a 30-day supply are set at $8 for generic drugs (Tier I), $16 for
preferred brand name drugs (Tier II), and $33 for all other brand
name drugs (Tier III) when purchased at a participating retail pharmacy.
You may purchase up to a 90-day supply of medication at a pharmacy when prescribed
by your provider, by paying the applicable copayments (31- to 60-day supply
— two copayments, 61- to 90-day supply — three copayments).

Mail order copayments for
up to a 90-day supply are $8 for generic drugs, $25 for preferred
brand name drugs, and $41 for all other brand name drugs.

Effective January 1, 2006,
there is a $1,000 annual maximum in prescription drug copayments per person.
Once a person has paid $1,000 in copayments, that person is no longer required
to pay any prescription drug copayments for the remainder of the calendar year.

Note: The copayment
and plan maximum amounts listed above may increase each year based upon a “set
cost sharing formula” that is a part of the plan design.

A majority of pharmacies
participate with Caremark, however, some do not have agreements with Caremark
and are not a part of the Retiree Prescription Drug Plan. When using a non-participating
pharmacy, you will be asked to pay the full cost of the prescription drug to
the pharmacist and file a claim with Caremark for reimbursement. The reimbursement
will be based on the participating pharmacy allowance rather than the actual
charge(s) paid.

Some prescription drugs
are covered by the Retiree Prescription Drug Plan only in certain quantities.

COORDINATION OF
BENEFITS

Almost all group insurance
plans, including the Traditional Plan, provide for the coordination of benefits(COB).

Please note: The COB
rules may change if Medicare is involved. Please refer to the Medicare section
that begins on page 10 for more information.

For group plans that do
have a COB provision, the following rules determine which is the primary plan.

If you, the active employee,
are the patient, the Traditional Plan is primary for you. If your spouse or
eligible same-sex domestic partner is the patient, and covered under a health
plan provided through his or her employer, that plan is the primary plan.

When Medicare is involved,
the benefits of the plan that covers an active employee and/or his or her
dependents will be determined before the benefits of a plan that covers a
laid-off or a retired employee and his or her dependents.

If a dependent child
is the patient and is covered under both parents' plans, the following birthday
rule will apply.

Under the birthday rule,
the plan covering the parent whose birthday falls earlier in the year will
have primary responsibility for the coverage of the dependent children.
For example, if the father's birthday is July 16 and the mother's birthday
is May 17, the mother's plan would be the primary plan for the couple's
dependent children because the mother's birthday falls earlier in the year.
If both parents have the same birthday, the plan covering the parent for
the longer period of time will be primary.

This birthday rule regulation
affects all carriers and all contracts which contain COB provisions. It
applies only if both contracts being coordinated have the birthday rule
provision. If only one contract has the birthday rule and the other has
the gender rule (father's contract is always primary), the contract with
the gender rule will prevail in determining primary coverage.

If two or more plans
cover a person as a dependent child of separated or divorced parents, benefits
for the dependent child will be determined in the following order.

The plan of the parent
with custody is primary; followed by

The plan of the spouse
or eligible same-sex domestic partner of the parent with custody of the
child; then

The plan of the parent
not having custody of the child.

If it has been established
by a court decree — Qualified Medical Child Support Order (QMCSO) — that one
parent has responsibility for the child's health care expenses, then the plan
of that parent is primary.

If none of the above
rules determine the order of benefits, the plan that has covered the patient
for the longer period is the primary plan.

The Traditional Plan will
provide its regular benefits in full when it is the primary plan. As a secondary
plan, the Traditional Plan will provide a reduced amount which when added to
the benefits paid by the other group plan will equal up to 100 percent of the
eligible allowable expense.

Please note: No individual
can receive benefits under more than one Traditional Plan contract. There
is no coordination of benefits for major medical services for yourself or for
any of your dependents if you and your spouse or eligible domestic partner,
through separate employment, have selected the SHBP Traditional Plan as your
plan.

BASIC
BENEFITS

HOSPITALIZATION

Bills for eligible inpatient
care provided by a hospital are paid based on the contracted rates or reasonable
and customary allowance. If you or a covered family member is admitted to a
Horizon BCBSNJ participating hospital in New Jersey, the hospital will electronically
transmit the bill to Horizon BCBSNJ. If you enter an out-of-state hospital that
has a contract with another local Blue Cross Blue Shield plan, the hospital
will send the bill electronically through the Blue Card Program, which will
forward it to Horizon BCBSNJ for payment. If you use a non-participating eligible
hospital in or outside of New Jersey that does not have a contract with the
local Blue Cross Blue Shield plan, you or the hospital should send the bill
to Horizon BCBSNJ.

To qualify for benefits
under the Traditional Plan, hospital charges must be considered eligible and
must be provided in a SHBP eligible facility.

Coverage in the Hospital

The hospital benefits portion
of the Traditional Plan covers up to 365 days in a hospital per calendar year.
When an individual is hospitalized, (s)he begins working against the 365-day
maximum. If (s)he is released from the hospital but is readmitted in the same
calendar year, (s)he continues to work against that year's 365-day maximum.
At the beginning of the next calendar year, the 365 benefit days renew or start
over, provided that the individual was released from the hospital and has
not been readmitted for the same or related conditions for at least 90 days.

After the 365-day maximum
has been reached for a particular person, coverage under hospital benefits stops.
Medically-needed hospital expenses can continue to be covered under the Major
Medical portion of the plan subject to the total lifetime maximum.

Eligible alcohol and substance
abuse treatment services are covered like any other general illness under the
plan.

Eligible Services and
Supplies

The following services
and supplies provided during inpatient care are eligible under the hospitalization
portion of the Traditional Plan when included as part of the hospital bill.

Bed and meals in a semiprivate
room.

Intensive or special
care units when medically needed and at the appropriate level of care.

Services of all hospital
employees including hospital nurses (excluding private duty nursing), interns,
residents, physicians assistants, technicians, or independent contractors
who are paid by the hospital to provide the services rendered.

Use of the operating,
recovery, treatment, delivery, and/or emergency room.

Dressings, bandages,
oxygen, and plaster casts.

Drugs and medicines
that are administered in the hospital and have been approved by the federal
Food and Drug Administration for use by the general public (experimental drugs
are not eligible).

Physical therapy while
you are a hospital inpatient.

Diagnostic X-rays, radioactive
isotope studies, and laboratory and pathology services. (If you receive a
separate radiology or pathology bill, forward it to Horizon BCBSNJ for consideration
under the Major Medical portion of the plan.)

Services provided by
a hospital or nonprofit blood supplier for drawing, processing, or distributing
blood.

Surgically implanted
cardiac pacemakers, including batteries, electrodes and their replacements.

All other necessary services
and supplies furnished by the hospital except for take-home items and patient
convenience items (such as telephone, television, haircuts, guest meals, etc.).

The following facility
charges performed in an outpatient department and billed by the hospital
are eligible under the hospitalization portion of the Traditional Plan (physician
charges and other professional fees related to these services may or may not
have an Extended Basic Benefit component).

Surgery of a cutting
or cauterizing nature (except for chemical cauterization).

Approved surgical diagnostic
procedures. Call 1-800-414-SHBP (7427) if you need to know if a specific surgical
procedure will be covered under this provision.

OTHER SERVICES PAID
UNDER BASIC BENEFITS

Birthing Centers

As an alternative to conventional
hospital delivery room care for low-risk maternity patients, the hospitalization
portion of the Traditional Plan pays for care provided in birthing centers under
contract to Horizon BCBSNJ. Services routinely provided by the birthing centers,
including prenatal, delivery, and postnatal care, will be covered in full under
the Basic Benefits portion of the plan, if the delivery takes place at the center.
If complications occur during labor and delivery occurs in an approved hospital
because of the need for emergency or inpatient care, this care will also be
covered in full. If the delivery does not occur at the center, or if the care
of the patient transfers to a hospital maternity program, all expenses incurred
at the center for prenatal care will be considered under the Major Medical portion
of the plan.

Contact Horizon BCBSNJ
at 1-800-414-SHBP (7427) to identify eligible birthing centers near you. If
you do not reside in New Jersey, call your local Blue Cross Blue Shield plan
for eligible birthing centers it has under contract.

Dental Benefits - Inpatient

Dental care under the
Traditional Plan is very limited. The Basic Benefits portion of the plan may
provide coverage for inpatient and outpatient hospital charges related to
any of the services listed below.

Removal of bony impacted
molars.

The treatment of accidental
injuries caused by a traumatic event excluding damage caused by chewing. This
provision does not apply if the condition is due to an accidental injury
that occurred while the injured person was not enrolled in the plan.

Treatment for mouth tumors
if medically needed and at the appropriate level of care.

Medically needed
hospital and anesthesia charges incurred for dental services for severely
disabled members and children who can submit convincing documentation for
the medical need for the hospitalization/anesthesia services. Charges for
the actual dental procedures would not be eligible for benefit under the Traditional
Plan.

Dialysis

Dialysis is covered when
the services are provided and billed by an eligible hospital, by a separate
dialysis center, or by an eligible home health agency. The facility must make
arrangements for training, equipment rental, and supplies on behalf of the patient.
Home dialysis will be considered when there is documented evidence that the
services cannot be performed in an outpatient facility.

If the dialysis center
is not under contract with Horizon BCBSNJ, the charges will be considered under
the Major Medical portion of the plan.

Federal Government Hospitals

The Traditional Plan will
pay hospitals operated by the United States government (Veterans Administration
and Department of Defense) as if they were participating hospitals, regardless
of their location, for eligible charges for nonmilitary conditions.

The Traditional Plan will
pay hospitals operated by the United States government for nonmilitary patients
(i.e., patients other than military retirees and their dependents and dependents
of active duty military personnel) for eligible charges only if:

Services are for treatment
on an emergency basis for accidental injury from an external cause; or

Services are provided
in a hospital located outside of the United States and Puerto Rico.

Home Health Care Agency Benefits

The hospitalization portion
of the Traditional Plan covers home health visits as long as the circumstances
meet plan guidelines. Members receiving home health care must be home-bound
and must require skilled nursing care, physical therapy, occupational therapy,
or speech therapy under a plan prescribed by an attending physician and approved
by Horizon BCBSNJ. Eligible home health services provided by an approved participating
home health agency include:

Part-time skilled nursing
services provided by or under the supervision of a registered professional
nurse (R.N.).

Any other related treatment
and services eligible for hospital benefits, except the administration of
hemodialysis.

Medical social services
or part-time services by a home health aide during the period when you are
receiving eligible skilled nursing care, physical therapy or speech therapy
services.

Up to 60 visits are available
within 61 days per occurrence. Every three home health care visits by a participating
Horizon BCBSNJ home health care agency reduces your available inpatient days
by one (1). A prior inpatient hospital stay is not required to qualify for home
health agency benefits, however, your provider must contact Horizon BCBSNJ at
1-800-664-BLUE (2583) in order to certify benefits through a participating agency
prior to services being rendered. Benefits are not available for services rendered
by a non-participating home health care agency.

Home health care services
that are deemed "custodial" by Horizon BCBSNJ will not be eligible
for benefits under the Traditional Plan. Custodial services are primarily services
rendered that do not require the skill level of a nurse for performance. These
services include but are not limited to activities of daily living(ADLs): such
as bathing, meal preparation, dressing, feeding, aiding in ambulation, cleaning,
and laundry functions. Services that are rendered by a nurse or home health
aide that have been determined by Horizon BCBSNJ to be maintenance or supportive
care are also not eligible for benefits. Services provided by a companion
are not eligible for benefits.

Home Hemophilia
Treatment

Home hemophilia treatment
will be considered when there is documented medical evidence that these services
cannot be performed in an outpatient facility.

Hospice
Care Benefits

Benefits for hospice care
must be provided according to a physician prescribed course of treatment approved
by Horizon BCBSNJ with a confirmed diagnosis of terminal illness and a life
expectancy of six (6) months or less.

Family counseling related
to the eligible person's terminal condition.

Dietician services.

Inpatient room, board,
and general nursing services for related conditions.

No benefit consideration
will be given for any of the following hospice care benefits.

Medical care rendered
by the patient's private physician (these services would be paid under Major
Medical Benefits).

Volunteer services.

Pastoral services.

Homemaker services.

Food or home-delivered
meals.

Non-authorized private-duty
nursing services.

Dialysis treatment.

Bereavement counseling.

Hospice care benefits are
not limited to or counted against the benefit days available under the hospitalization
portion of the Traditional Plan. Inpatient benefits for hospice patients are
provided at the same level as those provided for non-hospice patients. For more
information on hospice care, please call Horizon BCBSNJ at 1-800-664-BLUE (2583).

Mastectomy

Hospital charges related
to mastectomy services are covered as follows, unless the patient and physician
determine that a shorter stay is medically appropriate:

A minimum of 72 hours
inpatient care following a modified radical mastectomy; or

A minimum of 48 hours
following a simple mastectomy.

Mental Health Benefits - Inpatient

Up to 20 inpatient days
for the treatment of non-biologically-based mental, psychoneurotic or personality
disorders are covered. These days are renewed every calendar year provided that
the patient has not been readmitted to the hospital for at least 90 days for
related illnesses.

Once the 20 inpatient benefit
days have been exhausted, any additional inpatient days and all in-hospital
medical services will be considered under the Major Medical portion of the Traditional
plan, subject to the deductible, coinsurance, and annual and lifetime mental
health maximum benefits. Please refer to page 43 for more information on available
Major Medical Benefits for mental health conditions.

Services rendered for the
treatment of a biologically-based mental illness are treated like any
other illness and are not subject to the 20-day maximum. Biologically-based
mental illness includes, but is not limited to, schizophrenia, schizoaffective
disorder, major depressive disorder, bipolar disorder, paranoia and other psychotic
disorders, obsessive-compulsive disorder, panic disorder, and pervasive developmental
disorder or autism.

Obstetrical Care Benefits - Inpatient

Hospital and delivery charges
related to the mother's obstetrical care and the newborn child's and mother's
initial stay in the hospital are covered. The plan will provide coverage for
a minimum of 48 hours of inpatient care for the mother and newly born child
following a vaginal delivery and up to 96 hours following a cesarean section.
If a doctor orders care beyond the 48/96 hours, medical records will be required
to determine continued medical need.

In some instances, the
plan will also pay bills related to the birth of a grandchild. In order for
benefits to be available, all of the following must apply:

The mother must be enrolled
as a dependent;

The mother resides with
the member and must be substantially dependent on the member for support and
maintenance; and

The mother is under the
age of 23 and unmarried.

Coverage for the grandchild
ends when the mother is discharged from the hospital. The grandparent may apply
for coverage of the grandchild under the SHBP only if he or she obtains legal
custody of the child.

Organ Transplants

The following human organ
transplant procedures are eligible for coverage only with prior written pre-certification
by Horizon BCBSNJ:

Heart

Lung

Heart-lung

Pancreas

Liver

Certain bone marrow transplants.

The following human organ
transplant procedures are eligible for coverage without pre-certification by
Horizon BCBSNJ:

Services billed by an approved
hospital that participates in the Blue Quality Centers for Transplants (BQCT)
network for human organ transplant procedures are covered. The plan also provides
coverage for the cost of transportation and storage services related to organ
only when billed by a BQCT network hospital. Transportation and lodging for
the donor or recipient is not eligible.

If you choose to use a
hospital that is not participating in the BQCT network, you may be responsible
for 20 percent of some charges, in addition to amounts charged by providers
that are in excess of the reasonable and customary allowance.

In the absence of other
group insurance coverage, charges incurred by the organ donor that are directly
related to the transplant will be considered for coverage under this plan.

Benefits are available
for surgical services in connection with eligible human organ transplants when
provided by and billed by a physician.

Pre-admission Testing

Diagnostic tests that would
normally be a part of a hospital stay will also be paid by the plan if they
are performed on an outpatient basis by a hospital that participates in the
Horizon BCBSNJ pre-admission testing program.

Pre-admission testing is
covered at 100 percent only if you are scheduled for admission to a participating
hospital for treatment of the diagnosed condition that made the pre-admission
test(s) necessary. The testing will also be covered if the admission is postponed
or canceled for one of the following reasons:

The tests show a condition
requiring medical treatment before the admission.

A medical condition develops,
delaying the admission.

A hospital bed is not
available on the scheduled date of admission.

The tests indicate that
the admission is not necessary.

Pre-admission testing performed
at a nonmember facility is not covered under hospital benefits. It will, however,
be covered under the Major Medical portion of the plan.

Private Rooms

If you occupy a private
room in a hospital, you must pay the difference between the private room rate
and the average semiprivate room rate.

Skilled Nursing Facility

A skilled nursing facility
is a specific type of treatment center that falls between a hospital (which
provides care for acute illness) and a nursing home (which primarily provides
custodial, maintenance, and/or supportive care).The Traditional Plan does
not pay for nursing home care. Hospitalization coverage does, however, cover
up to 30 days of care in a skilled nursing facility when it is under
a plan prescribed by a doctor and approved by Horizon BCBSNJ. The plan's payment
to the member skilled nursing facility will be accepted as payment in full.
Room and board charges beyond 30 days are not covered under Major Medical
Benefits. Any charges, other than room and board charges, not eligible under
the hospitalization coverage, will be considered under the Major Medical portion
of the plan.

You may be transferred
to a member skilled nursing facility directly from your home or from a hospital
if your physician prescribes that you need skilled care, therapeutic services,
and treatment for your illness or injury.

Surgical Centers/Ophthalmic Surgical
Centers

If surgicalprocedures
are provided in an eligible surgicalcenter instead of a hospital,
the hospitalization portion of the plan will provide 100 percent coverage for
facility charges as long as you are admitted and discharged within a 24-hour
period and the center is under contract with any Blue Cross Blue Shield Plan.

The following criteria
must be met for the facility fees at any surgical center to be covered.

The facility must be
approved by the Centers for Medicare and Medicaid Services (CMS); and

The facility charge is
separate from the physician's charge.

Ophthalmic
Surgical Centers — Facility charges for certain
services provided by an outpatient ophthalmic surgical center as an alternative
to hospital inpatient or outpatient surgery are covered. Only the following
cataract surgical procedures are eligible.

Extraction of lens with
or without iridectomy; intracapsular, with or without enzymes.

Extended Basic
Benefits include a specific set of covered professional
services and supplies billed by a doctor that are paid according to a fee schedule
on a “first-dollar basis.” This means that the charge, if eligible, is paid
according to a fee schedule at 100 percent with no deductible considered. The
remaining amount above the level of the fee schedule would then be considered
at 80 percent of the reasonable and customary allowance with a deductible under
the Major Medical portion of the plan.

Shock therapy: up to
a fixed fee schedule amount for electroshock, insulin shock, or similar shock
treatments given for mental, psychoneurotic, or personality disorder.

X-rays (diagnostic):
up to $125 per calendar year for diagnostic X-rays performed, other than inpatient.

X-ray therapy: up to
$500 per calendar year for X-ray therapy performed, other than inpatient.

Impacted Teeth: up to
$264 for the removal of bony impacted molars or impacted bicuspids ($105 for
the first tooth and $53 for each of the next three teeth); Any remaining balance
will not be considered under the Major Medical portion of the plan.

Newborn well-care: up
to $42 for care of a healthy newborn child while both mother and child are
hospitalized; Any remaining balance will not be considered under the
Major Medical portion of the plan.

SERVICE BENEFITS

If you are covered in the
SHBP Active Group as a full-time employee and meet the income limitations below,
the Traditional Plan will pay 100 percent of the doctor's bills for certain
basic benefit services, such as surgery, anesthesia, and inpatient medical charges.
This provision does not apply to members of the SHBP Retired Group.

If you are unmarried,
with single coverage, you must have a gross annual income of less than $14,000;
or

If you have member and
spouse/domestic partner, parent and child, or family coverage, the combined
gross annual income of you and your spouse/domestic partner (if any) must
be less than $20,000.

Gross annual income
means salary, wages, business profits, interest, dividends, and income from
all sources. In determining if the 100 percent benefit is available, the plan
administrator will consider gross annual income in the calendar year before
the service was rendered.

In both instances, the
100 percent payment provision is subject to all other plan provisions, such
as medical need and reasonable and customary allowances. You are responsible
for notifying the plan when you qualify for service benefits within 90 days
of the service.

MAJOR
MEDICAL BENEFITS

The Traditional Plan includes
coverage for Major Medical services provided by doctors and other medical professionals.
The provider must meet the SHBP definition of a doctor, hospital, or other approved
provider for services to be covered.

Services and Supplies

The following services
are included under the Major Medical portion of the Traditional Plan.

Ambulance use for local
emergency transport. Transport by invalid coach is not covered.

Anesthetics and their
administration.

Breast prostheses following
reconstructive breast surgery.

Doctor's services for
surgical procedures and for diagnosis and treatment of illness and injury.

Hospital room and board
for a semiprivate room. If you are in a private room, the plan will pay the
semiprivate room rate and you must pay the difference. If the hospital has
no semiprivate rooms, the Major Medical portion of the plan will pay up to
80 percent of the hospital's lowest private room rate.

Other supplies and nonprofessional
services furnished by the hospital for medical care in the hospital, for example,
operating room, X-rays, medicines, laboratory tests, and similar charges.

Prescription drugs —
up to a 90-day supply — dispensed by a licensed pharmacist and approved by
the FDA for sale and use in the United States at the dosage and for indications
as approved by the FDA (see page 19 for additional information).

Note:
Prescription drug coverage is not available through the Traditional Plan
if a separate authorized prescription drug plan, including the SHBP Employee
Prescription Drug Plan, is offered through the employer.

Private duty professional
nursing under very strict standards. Private duty nursing must be ordered
by a doctor and provided by a registered nurse (R.N.) or a licensed practical
nurse (L.P.N.) other than you, your spouse, or a child, brother, sister, or
parent of you or your spouse. Private duty nursing will only be covered under
extraordinary circumstances upon evidence of a clear and convincing objective
need. Private duty nursing coverage will not be covered if the care is:

Custodial care (assistance
in the activities of daily living in a home, hospital, or facility of
any kind). If private duty nursing care primarily relates to custodial
care, regardless of whether there are elements of medically necessary
care, the private duty nursing care will not be covered under the Traditional
Plan; or

Normally provided
by or should be provided by hospital nursing staff; or

Rendered by or could
be provided by home health aides or any other nurses aides.

Scalp hair prostheses
prescribed or authorized by a doctor, but only if they are furnished in connection
with hair loss resulting from:

Treatment of disease
by radiation or chemicals;

Alopecia universalis
(totalis); or

Alopecia areata.

The maximum amount that
will be paid for any one person during a 24-month period is $500.

Therapy provided by
a qualified speech therapist as described below:

Speech therapy to
restore speech after a loss or impairment of a demonstrated previous ability
to speak. To qualify under (a), the loss or impairment must not be caused
by a mental, psychoneurotic, or personality disorder. Examples of non-covered
therapy include that which is provided to correct pre-speech deficiencies
and therapy provided to improve speech skills that have not fully developed.

Speech therapy to
develop or improve speech after surgery to correct a defect that both
(1) existed at birth or (2) impaired, or would have impaired, the ability
to speak.

Speech therapy services
will be considered eligible for a period of one year for children with
a documented medical history of multiple cases of Otitis Media and one
or more myringotomy(ies).

Treatment by a licensed
physical or occupational therapist. The actual disease must be clinically
demonstrated and therapy must be of proven value in the treatment of the condition.
An example of physical or occupational therapy not covered is that
which is provided for a learning or developmental disability and which is
educational in purpose or maintenance care.

X-rays and lab exams
when medically needed and at the appropriate level of care.

MAJOR MEDICAL PAYMENTS

Deductibles

The Major Medical portion
of the plan has an annual deductible which means that it is your responsibility
to pay the first portion of any eligible medical bills each year.

The deductible amount varies
depending on the type of employer for which you work.

State
Employees— The deductible amount varies depending on the contract
agreement between the labor union that represents you as an employee and the
State.

For all non-aligned employees
of the State of New Jersey and State colleges and universities; and for State
employees and employees of State colleges and universities covered by a collective
bargaining agreement that has agreed to provide for higher deductible amounts,
the annual deductibles are as follows:

Single - $250.

Member and Spouse
or eligible Domestic Partner - $250 per person.

Parent and Child(ren)
- $250 for employee and $250 in aggregate for child(ren).1

Family - $250
for employee and $250 in aggregate for all other family members.1

1The total
deductible for dependents adds up to $250 combined per year.

Local
Government/Education Employees, Certain State Employees, and All Retirees
— For employees of a SHBP participatingLocal Government employer (county, municipality,
municipal or local authority, etc.) or Local Board of Education; State employees
who are not affected by the contract agreements that provide for higher
deductible amounts; and all retirees enrolled in the SHBP, the annual
deductibles are as follows:

Single - $100.

Member and Spouse
or eligible Domestic Partner - $100 per person.

Parent and Child(ren)
- $100 for you and $100 for any one other child.2

Family - $100
for you and $100 for one other family member.2

2If two children
each have $50 in bills, the $100 deductible for other family members has not
been reached. If one child has $110 in eligible bills, then the $100 deductible
for other family members has been reached and eligible charges for treatment
of your spouse or other children would be eligible for payment at 80 percent
of the reasonable and customary allowance.

Deductibles — Terms and Conditions

Expenses for ineligible
services and charges in excess of reasonable and customary allowances do not
count toward your deductibles.

The benefit year in which
the deductible is measured runs from January 1 to December 31. However, if treatment
for an illness or injury is provided during the last three months of the year,
those eligible charges that were applied toward a deductible may be counted
toward meeting the deductible for the following year.

Additionally, if two or
more family members are injured in the same accident, then your family must
meet only one deductible. For instance, you are a local employee and your house
is damaged in a tornado and three of your family members are treated by a physician
at a cost of $50 each in eligible charges, for a total of $150. The $100 deductible
has been met, and the other $50 will be considered under the Major Medical portion
of the plan.

If you are enrolling in
the SHBP for the first time because your employer has decided to join, previously
paid charges in the current calendar year can be used to meet the deductible
requirements for the Traditional Plan. You must submit documentation to Horizon
BCBSNJ showing the eligible charges used to meet the deductible.

For example:You
work for a city that is joining the SHBP on July 1. Your employer's prior insurance
plan had a deductible of $200 and you have already paid $200 for yourself and
$100 for one child. When you join the SHBP on July 1, you will be considered
to have met the deductible for yourself and for other family members for that
calendar year.

Coinsurance

Under the Major Medical
portion of the Traditional Plan, you are required to pay 20 percent of the cost
of eligible reasonable and customary charges until you reach your out-of-pocket
maximum (the point at which the eligible charges for the year total $2,000 after
deductibles). Once an individual reaches his or her $2,000 ceiling, the plan
will pay 100 percent of the reasonable and customary allowance for treatment
that is medically needed. Since the coinsurance applies to each person in your
family, the actual amount you are required to pay each year will depend on the
number of dependents on your coverage. Expenses for ineligible services and
charges in excess of reasonable and customary allowances do not count toward
your out-of-pocket maximums.

For Example:

Example 1: You have
employee only coverage.

If you are a State employee
subject to the plan changes, you pay the first $250 (the deductible) and 20
percent of the next $2,000 (or $400) of eligible charges. After you have spent
a total of $650 (the $250 deductible and the $400 in coinsurance), the plan
will pay 100 percent of any other eligible charges in that year.

If you are a local employee,
a State employee not subject to plan changes, or a retiree, you pay
the first $100 (the deductible) and 20 percent of the next $2,000 (or $400)
of eligible charges. After you have spent a total of $500 (the $100 deductible
and the $400 in coinsurance), the plan will pay 100 percent of any other eligible
charges in that year.

Example 2: You have
employee and spouse coverage.

If you are a State employee
subject to the plan changes, you pay the first $250 for yourself and $250
for your spouse (the deductibles) and 20 percent of the next $2,000 in eligible
charges for each of you ($400 apiece or $800). After you have reached the
$650 limit for each person, the plan will pay 100 percent of any other eligible
charges for each person for the year. The maximum that you might need to pay
for deductibles and coinsurance is $1,300 ($250 deductible + $250 deductible
+ $400 in coinsurance + $400 in coinsurance).

If you are a local employee,
a State employee not subject to plan changes, or a retiree, you pay
the first $100 for yourself and $100 for your spouse (the deductibles) and
20 percent of the next $2,000 in eligible charges for each of you ($400 apiece
or $800). After you have reached the $500 limit for each person, the plan
will pay 100 percent of any other eligible charges for each person for the
year. The maximum that you might need to pay for deductibles and coinsurance
is $1,000 ($100 deductible + $100 deductible + $400 in coinsurance + $400
in coinsurance).

Example 3: You
have family coverage.

If you are a State employee
subject to the plan changes, you pay the first $250 for yourself and $250
for any combination of other family members (the deductibles). After any other
family members have over $250 in combined eligible charges, the deductible
for all the other family members has been met and bills for treatment of your
spouse and/or other children would be eligible for payment at 80 percent of
the reasonable and customary allowance. In addition to the two deductibles,
you are responsible for up to $400 in coinsurance for each person. After each
person meets that level, the plan will pay 100 percent of any other eligible
charges for each person for the year.

If you are a local employee,
a State employee not subject to plan changes, or a retiree, you pay
the first $100 for yourself and $100 for any one other family member (the
deductibles — must be $100 for yourself and one other individual. If two children
each have $50.00 in bills, the $100 for other family members has not been
met). After one other family member has over $100 in eligible charges, the
deductible for all the other family members has been met and bills for treatment
of your spouse and/or other children would be eligible for payment at 80 percent
of the reasonable and customary allowance. In addition to the two deductibles,
you are responsible for up to $400 in coinsurance for each person. After each
person meets that level, the plan will pay 100 percent of any other eligible
charges for each person for the year.

LIFETIME BENEFIT
MAXIMUMS

Major Medical Maximums

The individual lifetime
maximum for all benefits paid under the Major Medical portion of the Traditional
Plan is $1,000,000 subject to an automatic limited restoration feature.
Once the maximum lifetime benefit has been paid out, at the start of each calendar
year, any previously unused portion of a covered person's maximum will be carried
over and $2,000 or the lesser amount needed to restore the full maximum
will also be made available for benefits for that covered person.

If your coverage under
the Traditional Plan ends and begins again at a later date, your individual
lifetime maximum benefit resumes at the same level it was when your coverage
ended.

Mental Health Maximums

The Traditional Plan also
contains a unique automatic restoration provision, which can restore benefits
issued for non-biologically-based mental illnesses. This special restoration
of benefits is in addition to the restoration provision for the overall plan
lifetime benefit maximum. This provision is applicable in the calendar year
immediately following the initial calendar year in which benefits are paid for
mental illness. The patient must be a covered person at the beginning of the
year the restoration begins. The maximum that may be restored in a calendar
year is $2,000. The amount restored will be the lesser of $2,000
or the amount that will bring the total lifetime benefits to $20,000.
A maximum restoration of $20,000 is available for the lifetime of the
patient. Services for mental and nervous disorders, that are non-biologically-based,
have a $10,000 annual maximum/$20,000 lifetime maximum with a
$2,000 automatic restoration provision for all services.

AUTOMOBILE-RELATED
INJURIES

The Traditional Plan will
provide secondary coverage to Personal Injury Protection (PIP) unless the plan
has been elected as primary coverage by or for the employee covered under this
contract. This election is made by the named insured under the auto insurance
PIP program and affects that member's family members who are not themselves
the named insured under another auto policy. The Traditional Plan may be primary
for one member, but not for another if the persons have separate auto policies
and have made different selections regarding primacy of health coverage.

The Traditional Plan is
normally secondary to automobile insurance coverage. However, if the automobile
insurance contains provisions which made the automobile insurance coverage secondary
or excess to the Traditional Plan, the Traditional Plan will be primary.

If the Traditional Plan
is primary to PIP or other automobile insurance coverage, benefits are paid
in accordance with the terms, conditions and limits set forth in your contract
and only for those services normally covered under the Traditional Plan.

Please note: If
you elect to have the Traditional Plan as primary to PIP, prior notification
to Horizon BCBSNJ is not required. Upon receipt of an auto related claim, Horizon
BCBSNJ will request the submission of written documentation, such as a copy
of your policy declaration page, for verification of your selection.

If the Traditional Plan
is one of several health insurance plans which provide benefits for automobile
related injuries and the covered employee has elected health coverage as primary,
these plans may coordinate benefits as they normally would in the absence of
this provision.

Please note: There
is no coordination of benefits for prescription drug expenses.

If the Traditional Plan
is secondary to PIP, when applicable, the actual benefits payable will be the
lesser of:

The remaining uncovered
allowable expenses after PIP has provided coverage, subject to medical appropriateness
and other provisions, after application of deductibles and coinsurance; or

The actual benefits that
would have been payable had the Traditional Plan been primary to PIP.

SPECIFIC
COVERAGE AREAS

In order to be
eligible for reimbursement all services must be medically needed at the appropriate
level of care and meet all other plan provisions.

Acupuncture

Acupuncture treatment is
covered when the services are for the treatment of pain, documented by a diagnosis,
and rendered by a Licensed Acupuncturist or Licensed Medical Doctor (M.D., D.O.).
Acupuncture treatment is subject to maintenance and supportive
care provisions.

Examples of acupuncture
services that are not eligible under the Traditional Plan include weight
loss and smoking cessation.

Alcohol and Substance Abuse Treatment

Alcohol and substance abuse
treatment is covered like any other illness. The following alcohol and substance
abuse treatment services are covered when they are provided by an eligible residential
treatment facility to a member who is being treated as an inpatient, outpatient,
or when they are provided as aftercare by an eligible detoxification facility.

Counseling for the family
of the person who is receiving covered inpatient services, if the family member
is covered under the contract.

Initial evaluation.

Individual and group
therapy.

Psychotherapy to treat
alcohol or substance abuse is covered under the mental health benefit and is
subject to the annual and lifetime maximum benefits.

Allergy Testing

Most commonly used methods
of allergy testing are covered. However, some methods are subject to medical
need and appropriateness review before eligibility can be determined. This includes,
but is not limited to, the following tests.

RAST (Radioallergosorbent
Testing).

MAST (Multiple Radioallergosorbent
Testing).

FAST (Fluorescent Allergosorbent
Testing).

ELISA (Enzyme-Linked
Immunosorbent Assay).

Ambulance

Ambulance use for local
emergency transport to the nearest eligible facility equipped to treat the emergency
condition is covered.

The Traditional Plan does
not cover chartered air flights, non-emergency air ambulance, invalid coach,
transportation services, or other travel, lodging, or communication expenses
of patients, practitioners, nurses, or family members.

Biofeedback

Biofeedback to treat a
medical illness or a biologically-based mental illness is covered like any other
general condition under Major Medical Benefits. Biofeedback to treat non-biologically-based
mental or psychiatric conditions will be attributed to mental health and will
be subject to the mental health benefit maximums.

Blood

Blood, blood products,
blood transfusions, and the cost of testing and processing blood are covered.
The Traditional Plan does not pay for blood which has been donated or replaced
on behalf of the patient.

Breast Reconstruction

If you are receiving benefits
in connection with a mastectomy and elect to have breast reconstruction along
with that mastectomy, Major Medical Benefits will provide coverage for the following:

Reconstruction of the
breast on which the mastectomy was performed.

Prosthesis(es).

Surgery and reconstruction
of the other breast to produce a symmetrical appearance.

Physical complications
at all stages of the mastectomy, including lymphedemas.

Chiropractic Services

There is a 30-visit benefit
maximum for chiropractic services per person per calendar year. The chiropractor
must be licensed, the services must be appropriate for the diagnosed condition(s),
and must fall within the scope of practice of a chiropractor in the state in
which he or she is practicing.

Dental care under the Traditional
Plan is very limited. The plan will pay a basic benefit for the removal of bony
impacted molars (see Impacted Teeth), and will pay
for the treatment of accidental injuries (see below), and treatment for mouth
tumors if medically needed and at the appropriate level of care.

Extended Basic Benefits
coverage will pay for professional fees for covered dental services, including
anesthesia, whether performed in a hospital or a dental office.

There is no additional
coverage through Major Medical Benefits toward the removal of bony impacted
molars and impacted bicuspids.

Accidental
Dental— The Major Medical portion of the Traditional
Plan may provide coverage for the treatment of accidental dental injuries. You
must have been a covered person at the time the accident occurred. Accidental
dental is considered an injury to teeth (must be sound natural teeth) which
is caused by an external factor such as damage caused by being hit by a hockey
puck or having teeth broken in a fall on the ice.

Breaking a tooth while
chewing on food is not considered accidental dental. Examples of ineligible
dental services include, but are not limited to, breaking a tooth on a popcorn
seed, olive pit, or on a bone in a piece of meat.

Stress fractures in teeth
are very common and undetectable by X-ray. Stress fractures are often the cause
of tooth breakage. Treatment for this type of tooth breakage is considered a
dental service and not eligible for reimbursement under the Traditional
Plan.

The Major Medical portion
of the Traditional Plan may also provide coverage for dental prostheses to replace
accidentally injured teeth, if the treatment and replacement occur within 12
months of the accident. A treatment plan must be submitted. If it is determined
that treatment cannot be reasonably completed within 12 months, this time limit
may be extended.

Diabetic Self-Management
Education

Diabetes self-management
education is covered when the services are provided by one of the following:

Physician

Nurse practitioner

Clinical nurse specialist

Registered dietician
certified as a diabetic educator

Pharmacist

Podiatrist

Eligible educational services
for Traditional Plan members that have been diagnosed with diabetes include:

One initial diabetic
self-management session.

A maximum of four follow-up
refresher sessions per calendar year.

Hospital-Based Weight Loss Programs

Hospital-based weight loss
programs may be eligible for benefits for a patient diagnosed with morbid obesity.
Call Horizon BCBSNJ at 1-800-414-SHBP (7427) to verify eligibility prior to
enrolling in a hospital-based weight loss program.

Infertility Treatment

The State Health Benefits
Program has established Assisted Reproductive Technology (ART) benefits that
were effective as of July 1, 2000, for members of the Traditional Plan. See
Appendix III for plan details.

Lithotripsy Centers

Lithotripsy services are
covered when they are performed in an approved hospital or lithotripsy center.
The approved centers in New Jersey are:

Stone Center at UMDNJ
- Newark

Midlantic Stone Center
- Marlton

NJ Kidney Treatment Center
- New Brunswick

Information regarding out-of-state
approved lithotripsy centers may be obtained by calling the Horizon BCBSNJ Customer
Service at 1-800-414-SHBP (7427).

Lyme Disease Intravenous Antibiotic
Therapy

All intravenous antibiotic
therapy for the treatment of Lyme Disease must be pre-certified by Horizon BCBSNJ.
When intravenous therapy is determined to be medically appropriate, the supplies,
cost of the drug, and skilled nursing visits will be covered services.

To pre-certify intravenous
therapy for treatment of Lyme Disease, please call Horizon BCBSNJ at 1-800-664-BLUE
(2583). The State Health Benefits Program’s policy on Lyme Disease treatment
is found in Appendix III.

Mammography Benefit

Coverage of screening mammographies
is mandated by law and is an exception to the general rule that well care is
not covered under the Traditional Plan. Routine mammography is covered as follows:

One baseline mammography
at any age.

Age 40 and older, one
screening mammography per year.

A woman who is under
40 years of age and has a family history of breast cancer or other breast
cancer risk factors, a mammography at such age and interval as deemed medically
needed and at the appropriate level of care by the woman’s health care provider.

Mental Health Treatment

Mental health treatment
by any of the following providers working within the scope of their licenses
is covered if the treatment is determined to be medically needed and the patient
has not reached the annual or lifetime benefit maximums (see Mental
Health Maximums):

Licensed psychologist

Medical doctor

Licensed clinical social
worker (LCSW)

Certified nurse practitioner
(CNP)

Clinical nurse specialist
(CNS)

Services rendered for the
treatment of a biologically-based mental illness are treated like any
other illness and are not subject to plan maximums. Biologically-based mental
illness includes, but is not limited to, schizophrenia, schizoaffective disorder,
major depressive disorder, bipolar disorder, paranoia and other psychotic disorders,
obsessive-compulsive disorder, panic disorder, and pervasive developmental disorder
or autism.

Orthopedic shoes

Orthopedic shoes that are
attached to a brace are covered. All other orthopedic shoes are not eligible
for reimbursement.

Pain Management

Pain management services
are covered subject to Horizon BCBSNJ’s guidelines. Pain management therapy
must be supported by a comprehensive evaluation of the patient, the rationale
for treatment must be well documented, and treatment must include a comprehensive
program that is multifaceted and may include education, rest, therapeutic exercises,
activity modification, physical therapy, occupational therapy, pharmacological
interventions, mental health and behavioral interventions, therapeutic and injection
interventions, and surgical interventions, if needed. Treatment will not always
achieve complete elimination of a patient’s pain. In such cases, an increase
in a patient’s level of function and teaching the patient strategies to cope
with residual pain will be the aim. If treatment reaches a point at which no
appreciable improvement in the patient’s condition is anticipated, services
will be considered maintenance and/or supportive care and will
not be eligible for reimbursement.

Pap Smears

Coverage of Annual Pap
smears, mandated by law, as ordered by a woman’s physician are eligible for
coverage, subject to deductible and coinsurance. The office visit, laboratory
costs associated with the Pap smear, and any necessary confirmatory tests are
covered.

Patient Controlled Analgesia
(PCA)

Patient Controlled Analgesia
(PCA) is covered when it is prescribed by a medical doctor and provided under
the guidance of one of the following:

Doctor

Anesthesiologist

Approved home care agency

Physical Therapy

Physical therapy that is
medically needed at the appropriate level of care, that is not determined
to be maintenance or supportive care, is covered based on one session per day.
A session of physical therapy is defined as up to one hour of physical therapy
(treatment and/or evaluation) or up to three physical therapy modalities provided
on any given day.

Private Duty Nursing

Private duty professional
nursing is only available under very strict standards. Private duty nursing
will only be covered under extraordinary circumstances upon evidence of a clear
and convincing objective need.

Private duty nursing must
be ordered by a doctor; and provided by one of the following:

Registered nurse (R.N.),
other than you, your spouse, or a child, brother, sister, or parent of you
or your spouse.

Licensed practical nurse
(L.P.N.), other than you, your spouse, or a child, brother, sister, or parent
of you or your spouse.

Private duty nursing will
not be covered if the care is:

The type of care normally
provided by or that should be provided by hospital nursing staff;

Rendered by or could
be provided by home health aides or any other nurses' aides; or

Primarily custodial care
or assistance in the activities of daily living in a home or facility of any
kind.

Scalp Hair Prostheses

A benefit maximum of $500
in a 24 month period, per person, is covered for scalp hair prostheses prescribed
or authorized by a doctor, only if furnished in connection with hair loss resulting
from:

Treatment of disease
by radiation or chemicals;

Alopecia universalis
(totalis); or

Alopecia areata.

Second Surgical Opinion

The Major Medical portion
of the Traditional Plan provides coverage for a second physician's personal
examination of a patient following a recommendation for any eligible surgical
procedures. The plan will pay for one consultation by a qualified specialist
physician.

If the second opinion specialist
does not confirm the need for surgery, the Major Medical portion of the Traditional
Plan will provide coverage for one additional consultation if requested by the
patient. The plan also will provide coverage for any diagnostic X-rays, laboratory
tests, or diagnostic surgical procedures required by the physicians performing
the consultations.

Shock Therapy Benefits

Basic (first-dollar) benefits
are payable for charges for electroshock treatments, insulin shock treatments,
and other similar treatments given for mental, psychoneurotic, or personality
disorder and then Major Medical Benefits apply. Benefits are also payable for
anesthesia in connection with the shock treatment and for all other eligible
services performed on that day for the disorder. There is a limit of 12 shock
treatments in each calendar year for each eligible person.

Speech Therapy Benefits

Speech therapy services
provided by a qualified speech therapist are covered only as follows.

Speech therapy services
to restore speech after a loss of a demonstrated previous ability to speak
or impairment of a demonstrated previous ability to speak. The loss or impairment
cannot be caused by a mental, psychoneurotic, or personality disorder.

Speech therapy to develop
or improve speech after surgery to correct a defect that existed at birth
and impaired the ability to speak, or would have impaired the ability to speak.

Speech therapy
to correct pre-speech deficiencies or to improve speech skills that have not
fully developed is not covered under the Traditional Plan.

In addition, speech therapy
services will be considered eligible for a period of one year for children with
a documented medical history of multiple cases of Otitis Media and one or more
myringotomy(ies).

Surgical Services

Multiple
Procedures

If multiple procedures
are performed during the same operative session, the procedure with the
highest Relative Value Unit will be considered the primary procedure and
the full reasonable and customary allowance will be allowed for that primary
procedure minus any applicable deductible and coinsurance liability. The
Relative Value Unit associated with the procedure codes represents the time
and skill involved in the performance of the procedure. All additional procedures
performed in the same operative session will be secondary procedures paid
at 50 percent of the reasonable and customary allowance.

Bilateral
Procedures

Bilateral procedures
will be paid at 150 percent of the reasonable and customary allowance for
one procedure. Services qualify as bilateral when anatomically there are
two specific body parts such as ears, eyes, knees, breasts, and kidneys.
A lesion on the right arm and a lesion on the left arm would not qualify
as bilateral since the skin is one body organ.

Temporomandibular
Joint Disorder (TMJ) and Mouth Conditions

Medical and surgical services
performed for the treatment of the jaw are covered. Services in relation to
the teeth in any manner are excluded. Charges for doctor's services or X-ray
examinations for a mouth condition are not eligible.

Charges for dental or orthodontic
services for a TMJ diagnosis are not eligible. This exclusion applies even if
a condition requiring any of these services involves a part of the body other
than the mouth, such as treatment of TMJ or malocclusion involving joints or
muscles by methods including but not limited to crowning, wiring, or repositioning
of teeth and dental implants.

Voluntary Case
Management

The State Health Benefits
Program provides voluntary case management services to Traditional Plan members.
It is often more cost effective and convenient for a case manager to be involved
in the coordination of care for a critically/catastrophically ill member in
some situations. This service is purely voluntary. You do not have to take advantage
of it.

By utilizing the services
of a case manager, your medically appropriate care is coordinated and managed
to provide the most cost-effective approach for the completion of long-term
care goals.

For the patient's family,
the primary advantage of case management is the additional flexibility and support
provided by the case manager. Sometimes it is possible for the patient to be
treated at home or in an alternate setting, such as a rehabilitation center
or hospice, with additional services or home health assistance.

Some conditions that typically
benefit from the services of a case manager are as follows:

Severe head injuries.

Spinal cord injuries.

Severe burn effecting
20 percent or more of the body area.

Multiple injuries due
to an accident.

Premature birth.

Cardiovascular Accident
(CVA) or stroke.

Congenital defect which
severely impairs a bodily function.

Brain injury or defect
caused by an accident or other unforeseen incident.

Terminal illness in which
a physician has confirmed a life expectancy of 6 months or less.

AIDS

Services that would be
considered for case management are identified in various ways.

Hospital discharge planners
contact Horizon BCBSNJ.

Claim submissions indicate
a diagnosis that may benefit from case management services.

Direct contact by a
member or family member inquiring about available case management services.

While the claims administrator
may suggest that case management is appropriate for a particular case, the claims
administrator is not responsible for initiating case management. Once it has
been agreed that the patient can benefit from case management services, the
case manager and the patient's physician will plan a course of treatment to
provide the most efficient and cost effective quality care possible.

If you would like more
information about Voluntary Case Management, please call Horizon BCBSNJ at 1-800-664-BLUE
(2583).

CHARGES
NOT COVERED BY THE PLAN

Even though a service or
supply may not be described or listed in this handbook, that does
not make the service or supply eligible for a benefit under this plan.

The following services
and supplies are not covered by the Traditional Plan:

Automobile accident-related
injuries or conditions. The Traditional Plan does not pay for the treatment
of injuries or conditions related to an automobile accident if automobile
insurance could have or should have covered the treatment. This exclusion
applies to, but is not limited to:

Existing motor vehicle
insurance contracts;

Motor vehicle contracts
that were purchased but have since lapsed;

Motor vehicle insurance
coverage that should have been purchased; and

Failure to make timely
claims under a motor vehicle insurance policy.

Autopsy.

Care that is primarily
custodial in nature.

Chair and stair lifts.

Charges above the reasonable
and customary allowance.

Charges billed by an
Assisted Living Facility.

Charges for services
or supplies not specifically covered under the plan.

Charges for services
rendered by a member of the patient’s immediate family (including you, your
spouse/domestic partner, your child, brother, sister, or parent of you or
your spouse/domestic partner).

Charges for the completion
of a claim form, photocopies of pertinent medical information, or medical
records.

Charges incurred prior
to or in the course of a legal adoption.

Charges that should have
been paid by Medicare, if Medicare coverage had been in effect.

Cosmetic procedures —
charges connected with curing a condition by cosmetic procedures. This provision
does not apply if the condition is due to an accidental injury that
occurred while the injured person is enrolled in the plan. Among the services
that are not covered are:

Removal of warts,
with the exception of plantar warts;

Spider vein treatment;
and

Plastic surgery when
performed primarily to improve the person's appearance.

Costs involving surrogate
motherhood or gestational carriers.

Court ordered services
or treatments.

Custom-molded shoes,
regardless of diagnosis.

Deluxe models of wheelchairs,
prosthetics, and other durable medical equipment.

Durable medical equipment
or supplies which are specifically excluded from coverage. To determine which
equipment or supplies are eligible for coverage, call 1-800-414-SHBP (7427).

Educational or developmental
services or supplies, or educational testing. This includes services or supplies
that are rendered with the primary purpose being to provide the person with
any of the following:

Training in the activities
of daily living. This does not include training directly related to treatment
of an illness or injury that resulted in a loss of a previously demonstrated
ability to perform those activities.

Instruction in scholastic
skills such as reading and writing.

Preparation for an
occupation.

Treatment for learning
disabilities.

To promote development
beyond any level of function previously demonstrated.

In the case of a hospital
stay, the length of the stay and hospital services and supplies are not
covered to the extent that they are determined to be allocated to the scholastic
education or vocational training of the patient.

Examinations to determine
the need for glasses or lenses of any type, typically known as refraction
examinations regardless of the diagnosis.

Eyeglasses or lenses
of any type except initial replacement for loss of the natural lens after
cataract surgery.

Low vision aids.

Eye surgery, such
as radial keratotomy, lasik procedures, or other refractive procedures
performed for any reason.

Foot conditions — charges
for doctor's services for:

A weak, strained,
flat, unstable, or imbalanced foot, metatarsalgia or a bunion. However,
this exclusion does not apply to an open cutting operation.

One or more corns,
calluses, or toenails. This exclusion does not apply to a charge for the
removal of part or all of a nail root and services connected with treating
metabolic or peripheral vascular disease.

Government plan charge
including a charge for a service or supplies:

Furnished by or for
the United States government;

Furnished by or
for any government, unless payment is required by law; or

To the extent that
the service or supply, or any benefit for the charge, is provided by any
law or government plan under which the member is or could be covered.
This applies to Medicare and "no-fault" medical and dental coverage
when required in contracts by a motor vehicle law or similar law.

Hearing aids.

Hearing examinations
to determine the need for hearing aids or the need to adjust a hearing aid,
no matter what the cause of the hearing loss.

Herbal or alternative
medicine treatments.

Hot tubs, saunas, or
pools of any type.

Hypnosis.

Immunizations and preventive
vaccines.

Legal fees.

Maintenance care — care
that has reached a level where additional services will not appreciably improve
the condition.

Marriage counseling.

Medicare providers —
services rendered by providers who are not registered with, or who
opt out of, Medicare.

Modifications to an auto
to make it accessible and/or driveable.

Modifications to a home
to make it accessible for a disabled person.

Mouth conditions — charges
for doctor's services or X-ray examinations for a mouth condition. This exclusion
applies even if a condition requiring any of these services involves a part
of the body other than the mouth, such as treatment of Temporomandibular Joint
disorders (TMJ) or malocclusion involving joints or muscles by methods including,
but not limited to, crowning, wiring, or repositioning of teeth. See the Glossary
for the definition of a mouth condition.

Nursing home care.

Over-the-counter supplies,
supplements, vitamins, medications, or drugs that do not require a prescription
order under Federal law, even if the prescription is written by a physician.
These include, but are not limited to, aspirin, vitamins, lotions, creams,
oils, formulas, liquid diets, and dietary supplements.

Personal comfort or convenience
items including telephone or television service, haircuts, guest trays, or
a private room during an inpatient stay.

Private rooms in a hospital.
If you occupy a private room in a hospital or facility, you must pay the difference
between the private room rate and the average semiprivate room rate.

Preventive care/routine
screening services — unless otherwise indicated, the Traditional Plan does
not provide coverage for services or supplies that are considered to be performed
for any of the following:

Routine well-care
as part of a routine examination.

Services and supplies
that are provided for a diagnosis that does not indicate an illness present
at the time the service are rendered.

Services that are
considered preventive or screening in nature.

All immunizations/vaccinations
— including well-child immunizations/vaccinations.

Flu shots/pneumonia
vaccines.

Well-care annual
physicals.

Cancer antigen tests
that are performed because of a family history. Specific guidelines apply
to the eligibility of cancer antigen tests. Therefore, you may wish to
request a pre-determination of benefits prior to having services rendered.

PSA (Prostate Specific
Antigen) as part of a routine examination or recommended due to a family
history of disease. Specific guidelines apply to the eligibility of PSA
for non-routine reasons. Therefore, you may wish to request a pre-determination
of benefits prior to having services rendered.

Self- or home-testing
kits whether prescribed by a doctor or not.

Services or supplies
that are not medically needed and/or not at the appropriate level of care
and charges in connection with such services or supplies. The fact that a
physician may prescribe, order, recommend, or approve a service or supply
does not, in itself, make it medically needed for the treatment and diagnosis
of an illness or injury or make it a covered medical expense.

Services that are commonly
or customarily provided without charge to the patient. Even when the services
are billed, the plan will not pay if they are usually not billed when there
is no coverage available.

Services and supplies
prescribed or provided by an ineligible provider.

Services rendered before
the effective date of coverage or after the termination of coverage date.
However, if the covered patient is hospitalized as an inpatient and coverage
terminates during the stay, that inpatient stay (as long as otherwise eligible)
will be covered through discharge.

Supportive care — supportive
care is defined as treatment for patients having reached maximum therapeutic
benefit in whom periodic trials of therapeutic withdrawals fail to sustain
previous therapeutic gains. In some instances therapy may be clinically appropriate
(such as treatment of a chronic condition that requires supportive care) yet
it would not be eligible for reimbursement under the Traditional Plan.

War — charges for illness
or injury due to a current act of war. War means either declared or undeclared,
including resistance or armed aggression.

Work-related injury or
disease. This includes the following:

Injuries arising
out of or in the course of work for wage or profit, whether or not you
are covered by a Workers' Compensation policy.

Disease caused by
reason of its relation to Workers' Compensation law, occupational disease
laws, or similar laws.

Work-related tests,
examinations, or immunizations of any kind required by your work.

Please note:
If you collect benefits for the same injury or disease from both Workers'
Compensation and the State Health Benefits Program, you may be subject
to prosecution for insurance fraud.

Examples of Non-Covered Services:

Example 1:
A physician orders inpatient private duty nursing for a surgery patient. Since
private duty nursing is not covered under the plan while confined in a hospital,
because these nursing services are provided by the hospital, the charges for
private duty nursing will not be paid.

Example 2: A person
is studying to become a therapist and is required by the school to enter therapy.
The treatment is intended to ensure that the new therapist is well-equipped
to work with patients. The treatment is not covered because it is primarily
educational.

Example 3: A physician
orders a drug that is FDA-approved but is not commonly used to treat the particular
condition. If the plan determines that the use is so new it is experimental,
the plan will not pay for the drug.

Example 4: A hospital
routinely requires an assistant to be present at certain operations. Other hospitals
do not have that requirement. The plan will not pay for the assistant unless
it can be demonstrated that the service was medically needed and at the appropriate
level of care.

THIRD
PARTY LIABILITY

Repayment Agreement

If you have received benefits
from the Traditional Plan for medical services that are either auto-related
or work-related, the Traditional Plan has the right to recover those payments.
This means that if your medical expenses are reimbursed through a settlement,
satisfied by a judgement, or other means, you are required to return any benefits
paid for illness or injury to the Traditional Plan. The repayment will only
be equal to the amount paid by the Traditional Plan.

This provision is binding
whether the payment received from the third party is the result of a legal judgment,
an arbitration award, a compromise settlement, or any other arrangement, whether
or not the third party has admitted liability for the payment.

Recovery Right

You are required to cooperate
with the Traditional Plan in recovering any amounts payable. The Traditional
Plan may:

Assume your right to
receive payment for benefits from the third party;

Require you to provide
all information and sign and return all documents necessary to exercise the
Traditional Plan's rights under this provision, before any benefits are provided
under your group's policy; or

Require you to give testimony,
answer interrogatories, attend depositions, and comply with all legal actions
which the Traditional Plan may find necessary to recover money from all sources
when a third party may be responsible for damages or injuries.

WHEN
YOU HAVE A CLAIM

FILING A CLAIM

Filing Deadlines - Proof of Loss

Horizon BCBSNJ must be
given written proof of a loss for which a claim is made under the coverage.
This proof must cover the occurrence, character, and extent of the loss. It
must be furnished within one year and 90 days of the end of the calendar
year in which the services were incurred. For example, if a service were
incurred in the year 2006, you would have until March 31, 2008, to file the
claim.

A claim will not be considered
valid unless proof is furnished within the time limit indicated above. If it
is not possible for you to provide proof within the time limit, the claim may
be considered valid upon appeal if the reason the proof was not provided in
a timely basis was reasonable.

Itemized Bills are Necessary

You must obtain itemized
bills from the providers of services for all medical expenses. The itemized
bills must include the following:

Name and address of provider;

Provider's tax identification
number;

Name of patient;

Date of service;

Diagnosis;

Type of service;

CPT 4 code; and

Charge for each service.

Foreign Claims

Bills for services that
are incurred outside of the United States must include an English translation
and the charge for each service performed. The exchange rate at the time of
service should also be indicated on the bill that is submitted for reimbursement.

Filling Out the Claim Form

Be sure to fill out the
claim form completely. Include the identification number that appears on your
identification card. Fill out all applicable portions of the claim form and
sign it. A separate claim form must be submitted for each individual and each
time you file a claim. The claim mailing address, which is noted on the back
of the claim form, is as follows:

All New Jersey hospitals
file claims directly with Horizon BCBSNJ. Out-of-state hospitals that participate
with the local Blue Cross Blue Shield (BCBS) plan will file the claim for you
through the Blue Card Program. If you have services out-of-state at a non Blue
Card hospital or out of the country, you are responsible for submitting an itemized
bill and a completed claim form to Horizon BCBSNJ.

Medical Claims

Providers in the Participating
Provider network will file claims directly with Horizon BCBSNJ. Out-of-state
providers that participate in the local BCBS plan will file medical claims with
Horizon BCBSNJ through the Blue Card Program. Many other providers will also
file medical claims as a service to their patients. If they do not, you are
responsible for submitting an itemized bill and a completed claim form to Horizon
BCBSNJ.

Medicare Claims and Other Coverage

If a member is a New Jersey
resident, has Medicare primary coverage, and receives care within New Jersey,
claims will be transmitted automatically from the Medicare carrier to Horizon
BCBSNJ.

If a member
resides in another state and has Medicare primary coverage, the member will
have to submit a copy of the Medicare Explanation of Benefits, an itemized
bill, and a completed Traditional Plan claim form to Horizon BCBSNJ.

If the member has primary
coverage with another carrier, the member must include a copy of the Explanation
of Benefits from the other carrier, an itemized bill, and a completed Traditional
Plan claim form to Horizon BCBSNJ.

Out-of-State Claims

Horizon Blue Cross Blue
Shield of NJ participates in a program that uses nationwide contracting provider
arrangements with all Blue Cross Blue Shield plans. This program allows SHBP
participants the use of out-of-state hospitals and doctors. Participants of
the SHBP may utilize the services of all hospitals and doctors across the nation
who contract with independent Blue Cross Blue Shield Plans.

Authorization to Pay Provider

The medical expense
coverage provided by the Traditional Plan is not assignable.
However, the member (or a qualified dependent in case of the member's death)
can, with the agreement of Horizon BCBSNJ, request that payment of any benefit
for eligible charges payable to the member, instead be paid directly
to the provider of service or supplies. Once payment is made to the provider
at the member's request, Horizon BCBSNJ will not have to pay the benefit again.
This direct payment is done as a courtesy to our member and is not an assignment
of benefits. In order for benefits to be payable directly to a non-participating
provider, the member must authorize this direction of payment by completing
the appropriate section of the claim form.

The Providers that participate
with any BCBS plan will be paid directly for eligible services.

QUESTIONS ABOUT
CLAIMS

If you have questions about
a hospital claim, hospital benefits, a medical claim, medical benefits, or if
you need a claim form, call 1-800-414-SHBP (7427).

If for any reason the claim
is not eligible, you will be notified of its ineligibility within 90 days of
receipt of your claim. To request a review of the claim, you should follow the
instructions described in the Claim Appeal Procedures
section.

APPENDIX
I

SUMMARY SCHEDULE
OF SERVICES AND SUPPLIES

New Jersey statutes, administrative
code, and agreements between the SHBP and Horizon BCBSNJ govern this plan. The
following schedule of benefits is a summary description of plan benefits. It
is not complete and does not describe all the limitations or conditions associated
with the coverage as described in prior sections. All pertinent parts of this
handbook should be consulted regarding a specific benefit. Health decisions
should not be made on the basis of the information provided in this schedule.

This section lists the
types of charges Horizon BCBSNJ will pay for covered services or supplies according
to all provisions, including but not limited to medical need and medical appropriateness,
the Schedule of Covered Services and Supplies, benefit limitations, and plan
exclusions.

Please note: The
fact that a doctor may prescribe, order, recommend, or approve a service or
supply does not, in itself, make it medically needed for the treatment and/or
diagnosis of an illness or injury or make it a covered medical expense.

The plan will provide the
coverage listed in this Schedule of Covered Services and Supplies, subject to
the terms, conditions, limitations, and exclusions stated within this booklet.

BASIC ( HOSPITALIZATION
) BENEFITS

Benefit
Period

365
days of inpatient care per Benefit Period

Every two
days in a member skilled nursing facility or every three home care
visits will count as one benefit day for inpatient care.

Renewal
Interval

Benefit
Period is renewed when 90 days without care as a related inpatient in a
hospital have elapsed.

Covered Services

Inpatient Hospital
Services

100 percent
up to 365 days for a semi- private room. Day 366+ subject to deductible
and 20 percent coinsurance

Skilled Nursing
Facility Charges

100 percent
for up to 30 days

Ambulatory Surgical
Center

100 percent for
facility charges

Home Health
Agency Care

100 percent
for up to 60 visits within 61 days, per occurrence

Hospice Care

100 percent

Accidental
Injury

100 percent
for facility charges

Inpatient
Alcohol and Substance Abuse

100 percent,
same as general inpatient benefit

Inpatient
Mental or Nervous Conditions

100 percent
for up to 20 inpatient days per calendar year. Expenses beyond 20 days are
paid under Major Medical Benefits subject to annual and lifetime maximums,
deductible, and coinsurance. (For biologically-based mental illnesses, coverage
is the same as for any other medical condition.)

Pre-admission
Testing

100 percent

Organ
Transplants

100
percent for organ transplants at an approved participating facility.
Non-participating facilities are covered at 80 percent subject to deductible
and coinsurance. Prior authorization is required except for cornea and kidney
transplants

EXTENDED BASIC
(MEDICAL-SURGICAL) BENEFITS

Covered
Services
Unless otherwise noted, any balance remaining after payment under Extended
Basic Benefits will be paid under the Major Medical portion of the Traditional
Plan.

Bony Impacted
Molars and Bicuspids

Subject to a $264
Benefit Period maximum for the removal ($105 for the first tooth
and $53 for each of the next three teeth)

Please note: The remaining charge is the member's responsibility
if there is no dental insurance coverage available. It is not eligible for
benefit under Major Medical Benefits.

Chemotherapy

Subject to a $500
Benefit Period maximum

Newborn Well-Care

Subject to a $42
Benefit Period maximum while both mother and child are hospitalized.

Please note: The remaining charge is the member's responsibility.
It is not eligible under Major Medical Benefits.

Pathology

Subject to a $25
Benefit Period maximum.

Physical Therapy

Subject to a $50
Benefit Period maximum.

Physician Servicesfor Surgical Procedures

Subject to a fixed
amount for specific surgical procedures.

Examples:

Cesarean Section

Subject to a $651
first dollar benefit per procedure.

Vaginal Delivery

Subject to a $420
first dollar benefit per procedure.

Total Hysterectomy

Subject to a $578
first dollar benefit per procedure.

D&C

Subject to a $126
first dollar benefit per procedure.

Appendectomy

Subject to a $368
first dollar benefit per procedure.

Repair Inguinal
Hernia

Subject to a $315
first dollar benefit per procedure.

Radioactive
Isotope Studies

Subject to a $125
Benefit Period maximum.

Radioactive
Isotope Therapy

Subject to a $500
Benefit Period maximum.

Radium, Radioactive
Isotope (sealed sources) or Radon Therapy

Subject to a $150
Benefit Period maximum.

Shock Therapy

Subject to a 12
Shock Treatment Benefit Period up to a fixed schedule amount.

X-rays (diagnostic)

Subject to a $125
Benefit Period maximum.

X-ray Therapy

$500 Benefit
Period maximum for X-ray therapy performed outside a hospital.

MAJOR MEDICAL
BENEFITS

Coinsurance

20 percent
of reasonable and customary allowance of eligible expense.

Out-of-Pocket
Maximum

After
$2,000 in claims for each member, the Traditional Plan pays 100 percent
of covered services.

$250
per covered person.$500 per Member and Spouse/Domestic Partner, Parent and Child, or
Family.

Local
Employees

$100
per covered person.

State
Employees not subject to plan changes, and All Retirees

$200
per Member and Spouse/Domestic Partner,
Parent and Child, or Family.

Common
Accident Deductible

If two
or more covered persons in the same family are injured in the same accident,
only one deductible will be applied in a benefit period to the covered services
and supplies resulting from the accident.

Fourth
Quarter Deductible Carry-over

Covered
services and supplies incurred within the last 3 months of a benefit period
which were applied against the deductible but did not satisfy the deductible
may be carried over and applied against the deductible for the following
benefit period.

Prior
Carrier Deductible Carry-over

The prior
carrier deductible carry-over applies only to new groups joining
the SHBP. Charges for covered services and supplies which satisfied any
portion of a deductible required for the final benefit period under the
employer's prior major medical group contract will be applied to satisfy
all or any portion of the initial deductible required under this program.

Major
Medical Lifetime Maximum

One million
dollars per covered person with an automatic limited restoration feature.
At the start of each benefit period, any of the covered person's previously
used part of a maximum will then be restored for future charges up to the
lesser of (a) $2,000 or (b) the amount needed to restore the full maximum.
If the covered person's coverage ends under the Traditional Plan and begins
again at a later date, the lifetime maximum benefit resumes at the same
level it was when the coverage ended.

APPENDIX
II

CLAIM APPEAL PROCEDURES

You or your authorized
representative may appeal and request that your health plan reconsider any claim
or any portion(s) of a claim for which you believe benefits have been erroneously
denied based on the plan’s limitations and/or exclusions. This appeal may be
of an administrative or medical nature. Administrative appeals might question
eligibility or plan benefit decisions such as whether a particular service is
covered or paid appropriately. Medical appeals refer to the determination of
medical need, appropriateness of treatment, or experimental and/or investigational
procedures.

The following information
must be given at the time of each inquiry.

Name(s) and address(es)
of patient and employee;

Employee's identification
number;

Date(s) of service(s);

Provider's name and
identification number;

The specific remedy being
sought; and

The reason you think
the claim should be reconsidered.

If you have any additional
information or evidence about the claim that was not given when the claim was
first submitted, be sure to include it.

If dissatisfied with a
final health plan decision on a medical appeal, only the member or the member's
legal representative (this does not include the provider of service) may appeal,
in writing, to the State Health Benefits Commission. If the member is deceased
or incapacitated, the individual legally entrusted with his or her affairs may
act on the member's behalf. Request for consideration must contain the reason
for the disagreement along with copies of all relevant correspondence and should
be directed to the following address:

Notification of all Commission
decisions will be made in writing to the member. If the Commission approves
the member's appeal, the decision is binding upon the health plan. If the Commission
denies the member's appeal, the member will be informed of further steps he
or she may take in the denial letter from the Commission. Any member who disagrees
with the Commission's decision may request, within 45 days in writing to the
Commission, that the case be forwarded to the Office of Administrative Law.
The Commission will then determine if a factual hearing is necessary. If so
the case will be forwarded to the Office of Administrative Law. An Administrative
Law Judge (ALJ) will hear the case and make a recommendation to the Commission,
which the Commission may adopt, modify, or reject. If the recommendation is
rejected, the administrative appeal process is ended. When the administrative
process is ended, further appeals will be made to the Superior Court of New
Jersey, Appellate Division.

If your case is forwarded
to the Office of Administrative Law, you will be responsible for the presentation
of your case and for submitting all evidence. You will be responsible for any
expenses involved in gathering evidence or material that will support your grounds
for appeal. You will be responsible for any court filing fees or related costs
that may be necessary during the appeal's process. If you require an attorney
or expert medical testimony, you will be responsible for any fees or costs incurred.

APPENDIX
III

STATE
HEALTH BENEFITS PROGRAM
MEDICAL TREATMENT POLICIES

INFERTILITY
TREATMENT

The following State Health
Benefits Program (SHBP) Assisted Reproductive Technology (ART) benefits were
effective as of July 1, 2000, for members of the Traditional Plan, NJ PLUS,
and Aetna HMO.

All services must be provided
at facilities that conform to standards established by the American Society
for Reproductive Medicine or the American College of Obstetrics and Gynecology.

Eligible Services

Consultations with infertility
specialists and/or at comprehensive infertility centers are covered. Under the
Traditional Plan and NJ PLUS out-of-network, screening tests such as HIV, routine
PAP, hepatitis panels, etc., which may be required prior to infertility treatments
will not be covered expenses. Under HMO and NJ PLUS in-network, those expenses
will be covered.

Ovulation Induction and
Monitoring are covered.

Laparoscopy, laparotomy,
and hysteroscopy for diagnosis or treatment of infertility are covered.

Attempts to reverse prior
sterilizations are covered.

Infertility treatment
is covered if the member had a prior sterilization procedure.

Up to six attempts at
artificial insemination are covered when in concert with ovarian hyperstimulation
or when using donor sperm. Artificial insemination is less invasive than other
infertility procedures and significantly less expensive and should be attempted
when it is likely to succeed.

The SHBP limits the reimbursement
of ART procedures (i.e., IVF1, ZIFT2, GIFT3)
and related services to three attempts per successful pregnancy. An attempt
is recorded for IVF or ZIFT when egg harvesting or retrieval and either culture
and fertilization of oocyte(s) or intracytoplasmic sperm injection (ICSI)
is performed; or, with GIFT, when the gametes are actually transferred to
the recipient's fallopian tube. A successful pregnancy is defined as
producing a live newborn. Embryo transfers using frozen embryos do not
count as a separate IVF or ZIFT attempt. If the first three attempts
are not successful, there is no further IVF, ET, ZIFT or GIFT benefit. This
is a lifetime benefit maximum regardless of what plan or how many plans provided
the service under the SHBP self-funded plans.

Examples of some of the
related services that would be covered within the three attempts include initial
consultation, office visits, cost of the drug(s), laboratory and/or radiologic
procedures, testicular sperm aspiration (TESA) and percutaneous epididymal sperm
aspiration (PESA) and the process of cryopreservation of embryos4
although not the storage costs. These procedures would all be subject to the
member's deductible and coinsurance or copayment requirements and any lifetime
Major Medical Benefit maximum.

In addition, any necessary
ovum or sperm donor costs would be covered, including but not limited to office
visits, costs of drugs, laboratory and/or radiologic procedures, retrieval,
cryopreservation, etc. but not including costs for transportation, lodging,
or any compensation.

An attempt is recorded
based on the criteria as defined regardless of whether fertilization or transfer
is successful. This is also true whether or not the pregnancy goes to term,
results in a live birth, or if it results in an ectopic pregnancy.

The number of embryos
to be transferred must follow standards set by the American Society of Reproductive
Medicine.

Microscopic assessment
of oocyte(s), thawing and preparation of cryopreserved embryos, sperm identification
from aspiration and preparation for transfer of embryos are covered services.

The health plan may negotiate
global fees for Assisted Reproductive Technology services and procedures with
providers. Global fees would include office visits, would remain at the prevailing
reimbursement rate (customary charge level), and would be based on an attempt
basis. Where global fees cannot be negotiated, reasonable and customary
allowances will be paid.

The process of cryopreservation
and sperm banking for a male undergoing cancer treatment who may become infertile
as a result are covered. Expenses for storage are not covered.

Ineligible Services

Services or procedures
that are not eligible for separate or additional reimbursement since they
are considered part of another more global service or procedure include, but
are not limited to:

The following services
are considered investigational and therefore ineligible for benefit:5

Acrosome reaction
assay - a diagnostic tool that may be used in the evaluation of male infertility
or sub-fertility. The acrosome (part of the sperm) is observed under
a microscope for "reaction" after being subjected to a stimulus.
Based on the reaction, it is proposed that poorly fertilizing sperms can
be differentiated from those with good fertilizing capacity.

Subzonal insemination
(SUZI).

Intratubal insemination.

The following are ineligible
for benefit:

Ovulation kits or
sperm testing kits and supplies.

Donor search fees.

Cycle management
fees or medical management fees.

Pre-implantation
Genetic Diagnosis (PGD).

Storage of frozen
embryos or sperm.

Costs involving surrogate
motherhood are not covered.

Under the Traditional
Plan and out-of-network in NJ PLUS, screening tests are not covered, including
the PAP, HIV, hepatitis panels, etc. which are routinely required prior
to IVF. These tests are covered under the HMO plans and in-network NJ
PLUS.

Psychological evaluation
or testing of donor(s).

Notes:

1 IVF is In
Vitro Fertilization which is a four step procedure. 1) Eggs produced by administering
fertility drugs (gonadotropins) are 2) retrieved from the woman's body and 3)
fertilized by sperm in a laboratory dish. The resulting embryos are 4) transferred
by catheter to the uterus.

2 ZIFT is Zygote
Intrafallopian Transfer in which eggs are fertilized by sperm in a laboratory
dish and resulting embryos are transferred to the woman's fallopian tubes from
which they travel naturally to the uterus.

3 GIFT is Gamete
Intrafallopian Transfer wherein, following hormonal stimulation of egg production,
a mixture of sperm and eggs is transferred, using a minor surgical procedure,
to the fallopian tubes, where fertilization may occur.

4 Cryopreservation
is freezing of embryos after a previous ART cycle for later thawing and transferal
to the uterus without the need for repeat stimulation and retrieval during subsequent
cycles.

5 This list
is not all inclusive and does not include all investigational services and procedures.
Denials are not limited to those on this list.

LYME DISEASE INTRAVENOUS
ANTIBIOTIC THERAPY

All intravenous antibiotic
therapy for the treatment of Lyme Disease must be pre-certified by Horizon BCBSNJ
or the claims will be denied, whether or not the care was medically needed and
appropriate to the level of care. When intravenous therapy is pre-certified
to be medically needed and appropriate, the supplies, cost of the drug, and
skilled nursing visits will be covered services.

All testing should be initiated
by antibody capture immunoassay, enzyme-linked immunosorbent assay (ELISA),
or immunoflourescence assay (IFA) as "screening" tests. Because these
tests are generally sensitive, specimens negative by ELISA or IFA need not be
further tested since the diagnosis of Lyme disease can virtually be excluded.
However, specimens that are positive, minimally reactive, or equivocal by ELISA
or IFA should be confirmed by Western blots because of their relatively low
specificity.6 If early Lyme Disease is suspected clinically despite
a negative antibody titer, serological investigations (starting with ELISA or
IFA) should be repeated approximately 2 to 4 weeks later since 60 percent of
infected individuals may test negative at the early stage. Antibiotic therapy
may prevent an increase in specific antibodies and seroconversion may even occur
after antibiotic therapy.

IgM Western blot is
considered positive if two of the following three bands are present: 24 Da (OspC),
39 kDa (BmpA), and 41 kDa (Fla). IgG Western blot is considered positive if
five of the following 10 bands are present: 18 kDa, 21 kDa (OspC), 28 kDa, 30
kDa, 39 kDa, 41 kDa (Fla), 45 kDa, 58 kDa (not GroEl), 66 kDa, and 93 kDa.

Serological findings are
dependent on disease duration and clinical manifestation.

Early Localized Lyme
Disease (Erythema migrans rash)

With early localized
Lyme Disease, less than half of patients have detectable specific antibodies,
predominantly IgM. Serologic testing is unnecessary.

Covered Treatment:
Early localized Lyme Disease should be treated with oral antibiotic therapy,
preferably a 21-day course of doxycycline or amoxicillin, not intravenous therapy.
[Patients intolerant to those oral medications may be treated with cefuroxime
axetil (oral), clarithromycin (oral), or azithromycin (oral).]7 Intravenous
therapy is not appropriate unless oral medications are not tolerated. If intravenous
antibiotic therapy must be used, 14 days of antibiotic therapy is equivalent
to 21 days of oral doxycycline.8

With early disseminated
Lyme Disease, the proportion of detectable specific antibodies rises to 70-90
percent with a switch from IgM to IgG. In order to be considered medically
appropriate, the following criteria must be met where applicable:

Medical certification
of early disseminated disease (disseminated infection with cardiac and
neurological problems);

Symptomatic pregnant
women with failed course of oral antibiotics.

Covered Treatment:
Early disseminated disease is treated with oral antibiotics (doxycycline 100
mg. twice a day or amoxicillin 500 mg. three times a day for 21 days).

Facial palsy with meningitis:
doxycycline 200 mg. twice a day or ceftriaxone 2 grams daily for 21 days or,
if that is not tolerated, may treat with intravenous antibiotic therapy.

Intravenous therapy is
appropriate for Lyme Carditis or AV block with PR interval greater than 0.3
seconds, for children under the age of nine, or if patient is unable to tolerate
oral antibiotics (nausea, vomiting, or malabsorption syndrome).

Oral antibiotic therapy
may be medically appropriate instead of intravenous therapy for palpitations
in the absence of EKG changes; "funny feeling on one side of the face"
in the absence of facial droop; facial palsy with normal cerebrospinal fluid
results.

All intravenous therapy
for treatment of Lyme Disease must be pre-certified by Horizon BCBSNJ. When
intravenous therapy is determined to be medically appropriate, the supplies,
cost of the drug, and skilled nursing visits will be covered services.

Pulse therapy, pulse
treatment with Imipenem, therapy with Vancomycin, and diagnostic tests involving
urine antigen and urine and serum polymerase chain reaction (PCR) are to be
considered investigational.

Neuroborreliosis, there
is no role for IgM ELISA or Western Blot in late stage disease because the
IgM tests have been shown to have a high number of false positives (low specificity)
in patients whose symptoms have been present for more than one month. IgG
Western Blot is usually sensitive and specific in this stage. IgG titers
are usually high and may remain so for several years, even when treatment
is successful. Elevated serum IgG alone indicates previous exposure to B.
burgdorferi but not necessarily recent or active infection. In no case should
serologic reactivity be considered synonymous with active infection.

Spinal fluid analysis
is mandatory in testing for neuroborreliosis unless a patient has a reactive
serum test with a confirmatory IgG Western blot and signs of neurologic disease.
If a patient has a clinical picture consistent with neuroborreliosis, spinal
fluid analysis may be appropriate even in the absence of a positive serologic
test. Intravenous antibiotic therapy will not be covered for possible neuroborreliosis
in the absence of a reactive serologic test without performing further studies
to confirm the diagnosis, i.e., CSF analysis and neuropsychological testing
or SPECT scanning.9

Expressing cerebrospinal
fluid (CSF) and serum ELISA results as a ratio may help correct for passive
diffusion of anti-Borrelia antibodies across the blood brain barrier and can
also be used to support (but not confirm) a clinical diagnosis of neuroborreliosis.
If the patient has cognitive dysfunction, neuropsychologic studies should
be done. If there is peripheral nerve damage, EMG and nerve conduction velocity
(NCV) studies are indicated: if there are sensory changes only, somatosensory
evoked potentials (SSEP) are in order.

Covered Treatment:may
be treated with up to 30 days of intravenous antibiotic therapy.

A second or extended
course of intravenous therapy must be pre-certified by Horizon BCBSNJ at
its sole discretion prior to extending the course of therapy. There must
be sufficient objective evidence, including objective clinical and laboratory
findings, of new or extended manifestations of the disease. The plan administrator
may require a consultation with an appropriate specialist.

Note:
Requests for more than 30 days require clinical/laboratory documentation
of the need.

A second course of intravenous
therapy is warranted for any one of the following indications:

Clinical evidence of
recurrent or new synovitis if other causes have been ruled out;

Clinical evidence of
recurrent or new objective neurologic physical findings in the absence of
other explanations;

Laboratory evidence of
persistent (non-improving) CSF pleocytosis if other causes have been
ruled out (if the spinal fluid showed a marked improvement but not complete
resolution of the pleocytosis soon after completing therapy, another course
of therapy may not be warranted);

Examples of cases where
an extension or repeat course of intravenous therapy may be medically appropriate
include: a patient who had left knee arthritis and received treatment only
to develop neurologic disease or arthritis of another joint after termination
of treatment; a patient who had treatment of established Lyme Disease in
the past and now develops new findings with increasing reactivity with Borrelia
Burgdorferi as indicated by expansion of the immunologic reactivity with
new bands on Western blot.

Notes:

6 In the early
stage of the disease (localized or even disseminated), there may be isolated
IgM reactivity to ELISA or IFA, or in a minority of patients, there may only
be an IgG response. Therefore, both IgM and IgG Western blots are recommended
in the early stage.

7 Note: cefuroxime
axetil, clarithromycin, and azithromycin have been studied only in early, localized
Lyme Disease, and azithromycin has been shown to be inferior to amoxicillin.

8 "Ceftriaxone
compared with doxycycline for the treatment of acute disseminated Lyme Disease."
New England Journal of Medicine 1997. 337:289-94.

9 Single photon
emission computed tomography (SPECT) scanning in and of itself is not suitable
to establish the diagnosis of Lyme Disease. It is, however, useful to evaluate
regional cerebral blood flow and is to be covered by the plan administrator
for patients suspected of Late/Chronic Neuroborreliosis. SPECT scanning has
been reported to show at six months that perfusion abnormalities improve in
patients with Lyme encephalopathy after a one-month course of intravenous ceftriaxone.
Therefore, it may be helpful to demonstrate whether a patient with suspected
Lyme Disease actually has encephalopathy and may be helpful to follow response
to therapy. SPECT scanning is not required in all patients and should only be
used as an adjunct to other diagnostic tests when there is uncertainty as to
the patient's diagnosis or response to therapy.

10 PCR testing
of CSF and synovial fluid are to be covered by the plan administrator for patients
suspected of Late/Chronic Lyme Disease. Coverage for PCR testing for other
uses or fluids will be determined by the plan administrator.

11 A persistently
positive PCR in spinal fluid should be interpreted with caution. It's not really
known what it means. In conjunction with other clinical/laboratory data, it
may help support the need for a second course of antibiotics. In and of itself,
it would not mandate therapy.

12 It would
be reasonable to extend or repeat treatment if a patient had a persistently
positive CSF PCR and ongoing symptoms.

APPENDIX
IV

GLOSSARY

Accidental Injury
— Physical harm or damage done to a person as a result of a chance or unexpected
occurrence.

Active Group Member
— An employee who has met the requirements for participation and has completed
a form constituting written notice of election to enroll for coverage in the
SHBP for him or herself and, if applicable, any eligible dependents. Also includes
eligible employees or dependents who continue SHBP coverage as a subscriber
in the SHBP's COBRA program.

Allowable Expense
— The allowance for charges for services rendered or supplies furnished by a
health care provider that would qualify as a covered expense.

Ambulatory Surgical
Center — An accredited ambulatory care facility licensed as such by the
state in which it operates to provide same-day surgical services.

Appeal — A request
made by a member, doctor, or facility that a carrier review a decision concerning
a claim. Administrative appeals question plan benefit decisions such as whether
a particular service is covered or paid appropriately. Medical appeals refer
to the determination of need or appropriateness of treatment or whether treatment
is considered experimental or educational in nature. Appeals to the State Health
Benefits Commission may only be filed by a member or the member's legal representative.

Basic Benefits —
That portion of the Traditional Plan that provides coverage for eligible hospital
(facility) charges. Basic Benefits are paid according to a "first-dollar"
basis either in full or at a specific fee schedule. Also known as hospitalization
benefits.

Benefit Period —
The twelve-month period starting on January 1st and ending on December 31st.
The first and/or last Benefit Period may be less than a calendar year. The first
Benefit Period begins on your coverage date. The last Benefit Period ends when
you are no longer covered.

Blue Card Program
— A national Blue Cross Blue Shield (BCBS) electronic claims billing program
through which participating hospitals and doctors can transmit bills for BCBS
plan members to any BCBS-administered health insurance program.

Calendar Year —
A year starting January 1 and ending on December 31.

Case Manager — A
person or entity designated by Horizon BCBSNJ to manage, assess, coordinate,
direct and authorize the appropriate level of health care treatment for those
members taking advantage of the Voluntary Case Management Program.

COBRA — Consolidated
Omnibus Budget Reconciliation Act of 1985. This federal law requires private
employers with more than 20 employees and all public employers to allow covered
employees and their dependents to remain on group insurance plans for limited
time periods at their own expense under certain conditions.

Coinsurance — The
portion of an eligible charge which is the member's financial responsibility.

Coordination of Benefits
— The practice of correlating the payments a plan makes with payments provided
by other insurance covering the same charges or expenses, so that (1) the plan
with primary responsibility pays first, (2) reimbursement does not exceed 100
percent of the actual expense, and (3) the plan does not pay more than it would
if no other insurance existed.

Cosmetic Services
— Services rendered to refine or reshape body structures or surfaces that are
not functionally impaired. They are to improve appearance or self-esteem, or
for other psychological, psychiatric or emotional reasons.

Covered Person —
An employee, retiree, or COBRA participant or a dependent of an employee, retiree,
or COBRA participant who is enrolled in the Traditional Plan.

Coverage — The plan
design of payment for medical expenses under the program.

Custodial Care —
Services that do not require the skill level of a nurse to perform. These services
include but are not limited to assisting with activities of daily living, meal
preparation, ambulation, cleaning, and laundry functions. Custodial care services
are not eligible for coverage under the Traditional Plan, including those that
are considered to be medically needed.

Deductible — The
portion of the first eligible charges submitted for payment in each calendar
year that the Major Medical portion of the Traditional Plan requires the member
or covered dependent to pay.

Dependent Coverage
— Coverage of an eligible family member of an enrolled member.

Detoxification Facility
— A health care facility licensed by the state it is in as a detoxification
facility for the treatment of alcoholism and/or substance abuse.

Domestic Partner
— Domestic partner SHBP coverage is only available to State employees/retirees
and to Local/Educational employees/retirees whose employer has adopted a resolution
to participate in health benefits coverage under Chapter 246, P.L. 2003, the
Domestic Partnership Act. Under the Act, a domestic partner is defined for
SHBP eligibility as a person of the same sex with whom the employee or retiree
has entered into a domestic partnership by registering with the local registrar
and receiving a Certificate of Domestic Partnership from the State of
New Jersey (or a valid certification from another jurisdiction that recognizes
same-sex domestic partners, civil unions, or similar same-sex relationships).
The cost of domestic partner coverage may be subject to federal tax (see your
employer or Fact Sheet #71, Benefits
Under the Domestic Partnership Act, for more information).

Durable Medical Equipment
— Equipment, which is designed and able to withstand repeated use and is customarily
used to serve a member with a medical condition.

Eligible Services and
Supplies — These are the charges that may be used as the basis for a claim.
They are the charges for certain services and supplies to the extent the charges
meet the terms as outlined below:

Medically needed and
at the appropriate level of treatment for the medical condition.

Listed in covered services
and supplies.

Ordered by a doctor (as
defined by the plan) for treatment of illness or injury.

Provided while you or
your eligible family members were covered by the plan.

Eligible
Dependent — A member's spouse or same-sex domestic partner (as defined
by Chapter 246, P.L. 2003) and unmarried child(ren) under the age of 23 who
lives with and is substantially dependent upon the member for support. Children
include natural, adopted, foster, and stepchildren. If a covered child is not
capable of self-support when (s)he reaches age 23 due to mental illness, mental
retardation, or a physical disability, coverage under the SHBP may be continued.

Emergency — A medical
condition manifesting itself by acute symptoms of sufficient severity (including
severe pain) such that a prudent layperson (including the parent of a minor
child or a guardian of a disabled individual), who possesses an average knowledge
of health and medicine, could reasonably expect the absence of immediate medical
attention to result in the following:

Placing the health of
the individual (or with respect to a pregnant woman, the health of the woman
or her unborn child) in serious jeopardy.

Serious impairment to
bodily function.

Serious dysfunction of
bodily organ or part.

Claims will be paid for
emergency services furnished in a hospital emergency department if the presenting
symptoms reasonably suggested an emergency condition as would be interpreted
by a prudent layperson. All procedures performed during the evaluation (triage)
and treatment of an emergency condition will be covered.

Employer — The State,
or a local public employer which participates in the State Health Benefits Program.

Extended Basic Benefits
— That portion of the Traditional Plan that provides coverage for eligible medical-surgical
(professional) charges such as X-rays and lab tests and surgical expenses. Extended
Basic Benefits are paid on a "first-dollar" basis according to a specific
fee schedule.

Facility Charges
— Charges from an eligible medical institution such as a hospital, residential
treatment center, detoxification center, ambulatory or separate surgical center,
dialysis center, or a skilled nursing center. These charges are generally paid
under the Basic Benefits (hospitalization) portion of the Traditional Plan.

Family or Medical Leave
of Absence — A period of time of pre-determined length, approved by the
employer, during which the employee does not work, but after which the employee
is expected to return to active service. Any employee who has been granted an
approved leave of absence in accordance with the Family and Medical Leave Act
of 1993 shall be considered to be active for purposes of eligibility for covered
services and supplies under your group's program.

First-Dollar Basis
— A provision of a benefit plan that provides reimbursement for incurred health
care costs "from the first eligible dollar" with no deductible.

Full Medicare Coverage
— Enrollment in both Part A (Hospital Insurance) and Part B (Medical Insurance)
of the federal Medicare Program. State law requires that anyone who is
enrolled in the Retired Group and is eligible for Medicare must enroll in both
Parts A and B of the Medicare Program in order to be covered in the State Health
Benefits Program.

Government Hospital
— A hospital which is operated by a government or any of its subdivisions or
agencies. This includes any federal, military, state, county, or city hospital.

Home Health Care Agency
— A provider which mainly provides skilled nursing care and therapeutic services
for an ill or injured person in the home under a home health care program designed
to eliminate hospital stays. To be eligible for reimbursement it must be licensed
by the state in which it operates, or be certified to participate in Medicare
as a home health care agency.

Hospice — A provider
that renders a health care program which provides an integrated set of services
designed to provide comfort, pain relief and supportive care for terminally
ill or terminally injured people under a hospice care program.

(1) It is accredited
as a hospital under the Hospital Accreditation Program of the Joint Commission
on Accreditation of Hospitals and Medicare approved.

(2) It (a) is legally
operated, (b) is supervised by a staff of doctors, (c) has 24-hour-a-day nursing
service by registered graduate nurses, and (d) mainly provides general inpatient
medical care and treatment of sick and injured persons by the use of the medical,
diagnostic, and major surgical facilities in it.

(3) It is licensed
as an ambulatory or separate surgical center. The center must mainly provide
outpatient surgical care and treatment.

(4) It is an institution
for the treatment of alcoholism not meeting all the tests of (1) or (2) but
which is:

A licensed hospital;
or

A licensed detoxification
facility; or

A residential treatment
facility which is approved by a state under a program that meets standards
of care equivalent to those of the Joint Commission on Accreditation of Hospitals.

(5) It is a birth center
that is licensed, certified, or approved by a department of health or other
regulatory authority in the state where it operates or meets all of the
following tests:

It is equipped and operated
mainly to provide an alternative method of childbirth;

It is under the direction
of a doctor;

It allows only doctors
to perform surgery;

It requires an exam by
an obstetrician at least once before delivery;

It offers prenatal and
postpartum care.

It has at least two birthing
rooms;

It has the necessary
equipment and trained people to handle foreseeable emergencies. The equipment
must include a fetal monitor, incubator, and resuscitator;

It has the services of
registered graduate nurses;

It does not allow patients
to stay more than 24 hours;

It has written agreements
with one or more hospitals in the area that meet the tests in (1) or (2) above
and will immediately accept patients who develop complications or require
post-delivery confinement;

It provides for periodic
review by an outside agency; and

It maintains proper medical
records for each patient;

“Hospital” does not
include a nursing home. Neither does it include an institution, or part of one,
that:

Is used mainly as a place
for convalescence, rest, nursing care, or for the aged or drug addicts.

Is used mainly as a center
for the treatment and education of children with mental disorders or learning
disabilities.

Provides home-like or
custodial care.

Hospitalization Benefits
— Benefits provided under a policy for hospital charges incurred by an insured
person because of an illness or injury. Also known as Basic Benefits.

Illness — Any disorder
of the body or mind of a covered person.

Indemnity Plan —
A plan that allows members to choose any eligible provider and hospital for
service and receive reimbursement for designated covered services. Payments
can be made either to enrollees or directly to health providers. This type of
plan is also referred to as fee-for-service. The Traditional Plan is an indemnity
plan.

Injury — Damage
to the body of a covered person.

Local Employee —
For purposes of SHBP coverage, a local employee is a full-time employee receiving
a salary and working for a Participating Local Employer. Full-time shall mean
employment of an eligible employee who appears on a regular payroll and who
receives salary or wages for an average number of hours specified by the employer,
but not to be less than 20 hours per week. It also means employment in all 12
months of the year except in the case of those employees engaged in activities
where the normal work schedule is 10 months. In addition, for local coverage,
employee shall also mean an appointed or elected officer of the local employer,
including an employee who is compensated on a fee basis as a convenient method
of payment of wages or salary but who is not a self-employed independent contractor
compensated in a like manner. To qualify for coverage as an appointed officer,
a person must be appointed to an office specifically established by law, ordinance,
resolution, or such other official action required by law for establishment
of a public office by an appointing authority. A person appointed under a general
authorization, such as to appoint officers or to appoint such other officers
or similar language is not eligible to participate in the program as an appointed
officer. An officer appointed under a general authorization must qualify for
participation as a full-time employee.

Local Employer —
Government employers in New Jersey, including counties, municipalities, townships,
school districts, community colleges, and various public agencies or organizations.

Maintenance Care
— Maintenance care is care that when provided does not substantially
improve the condition. When care is provided for a condition that has reached
maximum improvement and further services will not appreciably improve the condition,
care will be deemed to be maintenance care and no longer eligible for reimbursement.
Maintenance care services, even those that are considered to be medically needed,
are not eligible for coverage under the Traditional Plan.

Major Medical Benefits
— The supplemental program for health insurance that provides a reimbursement
of eligible expenses beyond the Basic Benefits. The program normally
provides for a deductible and coinsurance formula for specific services (generally
involving major illnesses and injuries). Full reimbursement is often provided
once the expenses paid by the individual reach a certain level. Although the
maximums that limit total benefits are usually substantial, maximums are generally
specified and mean that most policies do not provide completely unlimited protection.
Limits on particular services, such as psychiatric care, may also be specified.

Medical Need and Appropriate
Level of Care — A service or supply that Horizon BCBSNJ determines meets
each of these requirements:

It is ordered by a doctor
for the diagnosis or the treatment of an illness or injury.

The prevailing opinion
within the appropriate specialty of the United States medical profession is
that it is safe and effective for its intended use, and that its omission
would adversely affect the person's medical condition.

That it is the most appropriate
level of service or supply considering the potential benefits and harms to
the patient.

It is known to be effective
in improving health outcomes (for new interventions, effectiveness is determined
by scientific evidence; then, if necessary, by professional standards; then,
if necessary, by expert opinion).

It is furnished by an
eligible provider with appropriate training, experience, staff, and facilities
to furnish this particular service or supply.

Medical-Surgical or
Professional Benefits — Basic Benefits under the Traditional Plan for professional
charges such as X-rays and lab tests and surgical expenses toward the doctor's
operating fees. Medical-surgical benefits are paid on a set fee schedule and
remaining eligible charges are then automatically considered under the Major
Medical portion of the plan. Also known as Extended Basic Benefits.

Medicare — The federal
health insurance program for people 65 or older, people of any age with permanent
kidney failure, and certain disabled people under age 65. Medical coverage consists
of two parts: Part A is Hospital Insurance Benefits and Part B is Medical Insurance
Benefits. A Retired Group member and/or spouse who are eligible for Medicare
coverage by reason of age or disability must be enrolled in Parts A and B to
enroll or remain in SHBP Retired Group coverage.

Member — An employee,
retiree, or dependent who is enrolled under the Traditional Plan.

Mental or Nervous Condition
— A condition which manifests symptoms which are primarily mental or nervous,
whether organic or non-organic, biological or non-biological, chemical or non-chemical
in origin and regardless of cause, basis or inducement, for which the primary
treatment is psychotherapy or psychotherapeutic methods or psychotropic medication.
Mental or nervous conditions include, but are not limited to, psychoses, neurotic
and anxiety disorders, schizophrenic disorders, affective disorders, personality
disorders, and psychological or behavioral abnormalities associated with transient
or permanent dysfunction of the brain or related neurohormonal systems. Mental
or nervous condition does not include substance abuse or alcoholism.

Mouth Condition
— A condition involving one or more teeth, the tissue or structure around them,
or the alveolar process of the gums.

Off-Label Use —
A drug not approved by the FDA for treatment of the condition in question or
prescribed at a different dosage than the approved dosage.

Participating Hospital
— A health care facility licensed by the State it is in to provide hospital
care and services or any U.S. Government-operated hospital which has an agreement
with Blue Cross Blue Shield to provide hospital care both to a) the Blue Cross
plan's subscribers and b) other Blue Cross plans' subscribers through the Blue
Card Program.

Participating Provider
— A doctor or hospital which has a written agreement with their local Blue Cross
Blue Shield plan to provide care to both that plan's members and other Blue
Cross Blue Shield plan members.

Primary Health Plan
— A plan which pays benefits for a member's covered charge first, ignoring what
the member's secondary plan pays. A secondary health plan then pays the remaining
unpaid expenses in accordance with the provisions of the member's secondary
health plan.

Provider — Under
the SHBP, the term is used to define an eligible provider and includes medical
doctors, dentists, podiatrists, acupuncturists, psychologists, psychiatrists,
nurse midwives, licensed clinical social workers, chiropractors, certified nurse
practitioners, clinical nurse specialists, physical therapists, occupational
therapists, optometrists, and audiometrists who are properly licensed and are
working within the scope of their practice.

Public Employer —
A federal, state, county, or municipal government, authority, or agency; a local
board of education; or a state or county university or college.

Reasonable and Customary
— The plan makes payments based on the reasonable and customary reasonable and
customary allowance for supplies and services in a specific geographic area.
The reasonable and customary allowance is the general level of charges made
by others in the area for like services or supplies as determined by the Prevailing
Healthcare Charges System (PHCS). This schedule is updated on a semi-annual
basis. Reasonable and customary allowances are based on actual charges by physicians
in a specific geographical area for specific services.

Residential Treatment
Facility — A health care facility licensed, certified, or approved by the
State of New Jersey for treatment of alcoholism or substance abuse or meeting
the same standards, if out-of-state.

Retired Group Member
— An eligible retiree of a state-administered or local public pension fund who
has met the requirements for participation and has completed a form constituting
written notice of election to enroll for coverage in the Retired Group of the
SHBP for him/herself and, if applicable, any eligible dependents. Also includes
a surviving spouse of a deceased Retired Group member who has met the requirements
for and has completed a form constituting written notice of election to enroll
for coverage in the Retired Group of the SHBP for him/herself and, if applicable,
any eligible dependents. Also includes a surviving dependent child of a deceased
Retired Group member who had parent-child(ren) coverage, providing (s)he has
completed a form constituting written notice of election to enroll for coverage
in the Retired Group of the SHBP.

SHBP Member — An
individual who is either a SHBP Active Group, Retired Group, or COBRA participant,
and their dependents.

Skilled Nursing Facility
— A facility which is approved by either the Joint Commission on Accreditation
of Health Care Organizations or the Secretary of Health and Human Services and
provides skilled nursing care and services to eligible persons. The skilled
nursing facility provides a specific type of treatment that falls midway between
a hospital that provides care for acute illness and a nursing home that primarily
provides assistance with daily living.

State Biweekly Employee
— For purposes of SHBP coverage, state biweekly employee shall mean a full-time
employee of the State, or an appointed or elected officer, paid by the State's
centralized payroll system whose benefits are based on a biweekly cycle. Full-time
normally requires 35 hours per week.

State Health Benefits
Commission (Commission) — The entity created by N.J.S.A. 52:14-17.27 and
charged with the responsibility of establishing and overseeing the State Health
Benefits Program.

State Health Benefits
Program (SHBP) — The SHBP was originally established by statute in 1961.
It offers medical, prescription drug, and dental coverage to qualified public
employees and retirees, and their eligible dependents. Local employers must
adopt a resolution to participate in the SHBP and its plans. The State Health
Benefits Program Act is found in the N.J.S.A. 52:17.25 et.seq. Rules governing
the operation and administration of the program are found in Title 17, Chapter
9 of the New Jersey Administrative Code.

State Monthly Employee
— For purposes of SHBP coverage, state monthly employee shall mean a full-time
employee of the State, or an appointed or elected officer, whose benefits are
based on a monthly cycle and whose payroll system is autonomous (not paid by
the State's centralized payroll system). Full-time shall mean the usual full-time
weekly schedule for the particular title, which normally requires 35 hours per
week.

State Monthly Employer
— Employers whose benefits are based on a monthly cycle and whose payroll system
is autonomous (not paid by the State's centralized payroll system). This includes
state colleges and universities and participating independent state commissions,
authorities, and agencies such as:

Rutgers, the State University
of New Jersey

Palisades Interstate
Park Commission

New Jersey Institute
of Technology

University of Medicine
& Dentistry of NJ

Thomas A. Edison State
College

William Paterson University

Ramapo State College

Rowan University

College of New Jersey

Montclair State University

New Jersey City University

Kean University

Stockton State College

New Jersey State Library

New Jersey State legislature
and legislative offices

New Jersey Building Authority

New Jersey Commerce and
Economic Growth Commission

Waterfront Commission
of New York Harbor

Agencies or special projects
that are supported from, or whose employees are paid from, sources of revenue
other than general funds, which other funds shall bear the cost of benefits
under this program.

Substance Abuse
— The abuse or addiction to drugs or controlled substances, not including alcohol.

Supportive Care
— Care for patients having reached the maximum therapeutic benefit in whom periodic
trials of therapeutic withdrawals fail to sustain previous therapeutic gains.
Supportive care services, even those that are considered to be medically needed,
are not eligible for coverage under the Traditional Plan.

Surgical Center
— Also termed as surgicenter. An ambulatory-care facility licensed by a state
to provide same-day surgical services.

Surgical Procedure
— This includes cutting, suturing, treatment of burns, correction of fracture,
reduction of dislocation, manipulation of joint under general anesthesia, application
of plaster casts, electrocauterization, tapping (paracentesis), administration
of pneumothorax, endoscopy, or injection of sclerosing solution.

Waiting Period —
The period of time between enrollment in the State Health Benefits Program and
the date when you become eligible for benefits.

APPENDIX
V

NOTICE OF PRIVACY
PRACTICES TO ENROLLEES IN
THE NEW JERSEY STATE HEALTH BENEFITS PROGRAM

This Notice
describes how medical information about you may be used and disclosed and how
you can get access to this information.

The publications and fact
sheets available from the Division of Pensions and Benefits provide information
on a variety of subjects. Employees and retirees can obtain copies of these
publications by contacting their employers or by contacting the Division of
Pensions and Benefits.